European Aeronautic Defence and Space Company EADS N.V.

Annual Report 2001

ContentsEADS at a Glance 2Key Figures 4Message from the Chairmen 6CEOs: Answering to our Stakeholders 8

Financial Markets & Policy 10Strategic Overview 12Market Overview 14Feature Section 18Business Structure 30

EADS in 2001

Revenues €30.8bnOrder intake €60.2bnOrder book €183.3bnEBIT* Earnings before interest and taxes €1.7bnEarnings per share* €1.16

Work force (number of employees) 102,967*pre-goodwill amortisation and exceptionals

European Aeronautic Defence and Space CompanyThe Group was formed in 2000 by the merger of aerospace and defence industry leaders

in France, Germany and Spain sharing a common vision of the future. EADS is today the

second largest global aerospace and defence group in the world. We hold commanding

market positions in civil and military aircraft businesses, space technology, helicopters,

missile systems and support services.

Our clear, integrated business strategy is focussed on growing profitably by meeting

and anticipating the needs of our customers. We employ world-class advanced

technology, and seek constant improvement to our products, processes and ways

of doing business. In a fast-developing field, the diversity, creativity and openness

to change of our entire workforce are key competitive advantages.

Our actions are driven by one overriding principle: reliability. We deliver what

we promise.

We are committed to adding value for all our stakeholders by beingadaptable, market driven and innovative.

EADS 2001 1

Airbus 32Military Transport Aircraft 38Aeronautics 40Defence & Civil Systems 44Space 48

EADS International 52Headquarters Organisation 54Human Resources 55Corporate & Social Responsibility 56Corporate Governance 58

Financial Statements 60Addresses 98Shareholder Information 100

Military Transport Aircraft

p.38–39

Description of the business

• 1,575 aircraft in order book

• 85 firm orders and 12 customercommitments for A380

• A380 development programme ontrack and on budget

• A340-500/-600 to enter service in 2002

• A318 readied for test flight

• ACJ corporate jetliner takesincreasing share of its market

• 8 countries sign up for the A400Mheavy military transport programme

• Contract signed for 8 C-295s for the Polish Air Force and acquisitionof 51% in Polish PZL WarszawaOkecje

• CN-235s ordered for the French Air Force

• The CN-235 selected as the fixedwing platform for the US CoastGuard’s Deepwater programme

Now an integrated company, 80%owned by EADS, Airbus produces theworld’s best-selling family of jet airliners.Airbus jets have incorporated manytechnical breakthroughs, such as fly-by-wire systems, and offer airlineoperators considerable advantages in terms of economical operation and environmental responsibility.

This Division produces light and mediummilitary transport aircraft and Airbusmilitary derivatives. It also manages theA400M heavy military transport aircraftprogramme. The A400M uses Airbustechnology and design, and will offerunique operational flexibility.

Airbus

p.32–37

Highlights of the year 2001

EADS at a GlanceEADS is a leading global aerospace and defence company, with a unique portfolio

of products, systems and services ranging from space launchers, satellites and missile

systems to jet airliners, military transport and fighter aircraft, helicopters as well as

maintenance and conversion services.

2 EADS 2001 EADS at a Glance

Order book/revenues

Revenues

2001 (in €bn)

Order book

0.5

1.3

2.6 Years

Airbus A380 A400M

Aeronautics

p.40–43

Space

p.48–51

Defence & Civil Systems

p.44–47

• MBDA created – the world’ssecond largest missile systemscompany

• Strengthening of Systems andDefence Electronics activitiesthrough partnerships andcontracts, e.g. in the UAV field

• Strengthening of secure telecombusiness through acquisition ofthe UK encryption leader (Cogent)

• Creation of a dedicated “Services”unit, concentrating particularly onoutsourced government services

• Ariane 4 gains new reliability record

• Step 3 of the Ariane 5 programme approved by the ESA Ministerial Conference

• Skynet 4 successfullyaccomplished

• Early 2002: UK MoD decides onSkynet 5, Astrium to supplysatellites

• Eurocopter share of the civilianmarket rises to 57%

• Over 500 military helicopters in order book; major exportsuccesses for Tiger and NH90 in 2001

• ATR Integrated created

• A €1.1 billion contract signed for Eurofighter training aids

This Division offers customers a comprehensive portfolio of productsand services – missile systems, defenceelectronics including surveillance andreconnaissance systems, radar, avionicsand electronic warfare products, securetelecommunications, test solutions andsupport and engineering services forgovernmental customers worldwide.

This Division is the third-largest spacesystems unit in the world, designing,developing and manufacturing telecomand earth observation satellites, orbitalinfrastructure and launchers, as well asproviding services related to spacetelecommunications and being active inoptronics and laser technologies.

This Division includes Eurocopter, theworld number 1 in civil and militaryhelicopter orders, and manufacturescombat aircraft like Eurofighter, regionalairliners, general aviation and businessaircraft. The Division also providesmaintenance and aircraft conversion for both military and civilian users.

EADS 2001 EADS at a Glance 3

Order book/revenues

Revenues

2001 (in €bn)

Order book 9.1

3.3

2.8 Years

Order book/revenues

Revenues

2001 (in €bn)

Order book 13.7

5.1

2.7 Years

Order book/revenues

Revenues

2001 (in €bn)

Order book 3.8

2.4

1.6 Years

Eurofighter EnvisatAster missile

In 2001, EADS outperformed all set financial targets. EBIT margin pre-R&D increased

to 12.1% and year-end net cash position was positive, at €1.5 billion.

■ 774

■ 1,531

Free Cash Flow

00* 01

■ 1,694

■ 1,399

EBIT pre-goodwillamortisation &exceptionals

00* 01

■ 2,046

■ 1,339

Internallyfinanced R&D

00* 01

■ 30,798

■ 24,208

Revenues

00* 01

■ 1,533

■ 2,143

Net Cash (debt)position

00* 01

■ 1,372

■ (909)

Net Result

00*

01

All figures are in millions of euros*2000 is proforma figures; Airbus 100% consolidation from 2001

Key Figures

4 EADS 2001 Key Figures

EADS increased revenues by 27% in 2001to €30.8 billion, exceeding the 20% growthtarget. Revenue growth was 10% withoutthe effect of the first time Airbus SAS 100%consolidation, reflecting higher Airbusdeliveries and strong growth in all divisionsexcept for Space Division. EBIT (Earningsbefore interest and taxes, pre-goodwill andexceptionals) of €1.7 billion was up by 21%,surpassing the 15% initial growth target.2001 EBIT includes the first time 100%consolidation of Airbus and the plannedincrease in Research & Development(R&D) expenses. Moreover, the EBIT targetwas exceeded despite non-recurringexpenses at the Defence and Civil SystemsDivision and at the Space Division, mostlyresulting from continuing restructuring

charges and exceptional depreciation ofassets; these were offset by a better thanexpected performance in other Divisionsand by over €100 million of additionalsavings resulting from merger integrationsynergies. Indeed, the Group hasoutperformed its target for 2001 and isahead of initial plans to deliver €600 millionof recurring synergies by 2004.

Net Result reached €1.4 billion, includingexceptional items namely from the AirbusSAS and MBDA creation. Net result pre-goodwill and exceptionals turned positivefrom a loss of €45 million in 2000 to €936million in 2001, representing €1.16earnings per share.

• Revenues grew by 27% to €30.8 billion, a 10% growth excluding Airbus 100% first time consolidation

• EBIT margin pre-R&D increased from 11.3% to 12.1%, in spite ofheavy non-recurring expenses

• Internally financed R&D rose, as anticipated, from 5.5% of revenues to 6.6%, mostly due to the development of the valuecreating A380 programme

• Free Cash Flow reached €774million, and thus contributed to the positive net cash position of€1.5 billion at year-end 2001

• Order book reached €183.3 billion, a 39% growth from 2000, or 16%excluding the effect of Airbus 100% first time consolidation

80%

20%

■ Civil 80%

■ Defence 20%

Revenue breakdown by market

■ Europe 45%

■ North America 34%

■ Asia 10%

■ Rest of the world 11%

Revenue breakdown by geography

45%

11%

10%

34%

■ 60,208

■ 49,079

Order Intake

00 01

■ 183,256

■ 131,874

Order Book

00 01

EADS 2001 Key Figures 5

Free Cash Flow reached €0.8 billion,reflecting a strong operating cash flow andthe continuing tight control of workingcapital requirement, while we havemaintained our investment effort to secureour future growth.

At the year-end, we still posted a solidpositive net cash position of €1.5 billion.

Order intake was up 23% to €60.2 billion,twice as high as revenues. This strongperformance illustrates not only thesuccess of the A380 project for which webooked 85 firm orders; it also clearlydemonstrates the competitiveness of ourmilitary programmes in export markets:with the NH90 ordered by Portugal,

Finland, Norway and Sweden, and theC-295 military transport aircraft ordered byPoland. The €18 billion A400M project isnot included in the 2001 order intake.

At year-end 2001, the order book of€183.3 billion was unparalleled in theindustry; it represents more than six yearsof revenues and each of our five Divisionshas a backlog exceeding one year and a half of revenues.

Last year, we spoke of setting out on an exciting journey. Today, we are happy to report on the first successful steps ofthat journey. Our financial performance and the strong marketposition of our products equip us well to cope with a particularlychallenging environment for our industry.

Since its inception in July 2000, EADS has established itself firmly as the second largest company in the aerospace anddefence industry, winning important new customers in exportmarkets, making new technological advances, launching newproducts such as the Airbus A380 and markedly improving itsfinancial results.

We have made substantial progress with the integration of theGroup’s operations. About 670 merger integration projects arecurrently under way to create value through inter-companysynergies and performance improvements and the more efficientuse of existing know-how and capital investment. This includes276 projects with a direct impact on EBIT. The results alreadyachieved are well in excess of expectations.

Synergies achieved through Group sourcing deserve specialmention, and other initiatives include the exchange of bestpractice, technologies and knowledge throughout the Group in the areas of Research and Technology (R&T),manufacturing, engineering and product support.

As a leader in the aerospace and defence industry, EADScontinued to drive further integration and industry consolidationin 2001. Among other initiatives, we established Airbus as a fully-integrated business and created MBDA, the world’s no. 2 missilesystems company.

Looking to the futureThe year, of course, was dominated by the appalling events of 11th September. Inevitably, these have had an important impacton our different businesses, and there is no doubt whatsoeverthat we face major challenges in the years ahead.

Message from the ChairmenWelcome to this report on the first full operating year of the European Aeronautic

Defence and Space Company.

6 EADS 2001 Message from the Chairmen

We are well-positioned to face thefuture’s challenges, and we have the willand resources to emerge all the strongerfor meeting them head-on.

However, we have full confidence in the strategy laid down bythe Board, and we are further strengthening the Group’sefficiency and profitability. Financial stability and soundness is ourclear priority. Airbus is already operating more efficiently as anintegrated company, and has confirmed the encouragingpotential for the A380 superjumbo; MBDA has led consolidationin the field of missiles; and we are forging new partnerships withUS industry – another of our major priorities.

It also remains a fact that we have a very strong portfolio of products, which gives us a robust competitive position in world markets, whatever the conditions may be. These includenew-generation commercial aircraft designed around ourcustomers’ requirements for economy, environmental safety andoperating efficiency, as well as technologically-advanced defencesystems which are able to contribute significantly to militaryeffectiveness and – ultimately – to political stability. We have, too, a growing capability to provide support services forcustomers both civil and military, in an increasing number of countries and locations.

Most importantly, we have a unique team of talented, resourcefuland committed people, capable of developing the new ideas,products, services and technologies that our customers – and theworld at large – will need in the future.

In short, we are well-positioned to face the future’s challenges,and we have the will and resources to emerge all the stronger for meeting them head-on.

We are going forward, fully committed to safeguarding the bestinterests of our shareholders, customers and employees; and welook forward to reporting further progress in the coming months.

Manfred Bischoff and Jean-Luc Lagardère

Manfred BischoffChairman

Jean-Luc LagardèreChairman

EADS 2001 Message from the Chairmen 7

What, for EADS, was the most important feature of the2001 financial results?

We have once again fulfilled the promises we made at the outsetof the year. EADS is one of the few companies in our industry tohave met, and even surpassed, its financial targets despite theevents of 11th September, with sales up more than 27%, EBIT* up to €1.69 billion and a net cash position of €1.5 billion at the endof 2001. This was achieved despite some heavy non-recurringexpenses – mostly in the Space Division, but also in Defence and Civil Systems Division. Moreover, our free cash flowgeneration demonstrated again that we can self-finance the AirbusA380 programme, without jeopardising our financial situation.

Can you point to some of the more significant events ofthe year?

Our defence business strengthened in 2001. The biggest singlepiece of news was the agreement by eight countries inDecember 2001 to go ahead with the A400M military transportaircraft. This is the first European aircraft in a market segment upto now dominated by US suppliers. EADS is the prime contractorfor this programme which secures over €18 bn of revenues andstrong EBIT from 2002 to 2018; the overall project stake for EADSbeing almost 90% (including 100% Airbus consolidation).

*EBIT pre-goodwill and exceptionals.

Our new-generation military helicopters – Tiger and NH90 – won contracts worth over €1.6 billion from Australia, the Nordiccountries and Portugal, against heavy competition. We now haveover 500 military helicopters in our order book. This shows justhow competitive our military products are in export markets –which is an excellent sign for the future.

Another significant step in defence was the creation of theMBDA company in partnership with BAE Systems from the UKand Finmeccanica from Italy. MBDA is the second-largest missilecompany in the world. It has an outstanding order bookamounting to €12 billion – nearly six years’ revenues. We’ve alsoreinforced EADS military telecom activity by the acquisition ofCOGENT, the UK leader in communication encryption.

In our civil business, Airbus was the clear market leader in 2001,taking 61% of global gross orders in value. The A380 programmealso got off to an excellent start, with 85 firm orders and 12customers commitments being signed with nine different clients.Importantly, 37 of those 85 were signed after the 11th September,demonstrating the strong market demand for this programme,even in a downturn.

Even so, the slump in air travel is going to hurt thegroup, isn’t it?

It is a challenge – particularly for Airbus. Airlines are having severeproblems. One immediate effect is that we had to stabilise Airbusdeliveries planned now at 300 for 2002, whereas we werepreviously planning to increase our production rate significantly.

Future A380 building

Answering to our Stakeholders The Chief Executive Officers address some of today’s key questions.

8 EADS 2001 Answering to our Stakeholders

But air traffic indicators show a slight recovery at the beginning of 2002. Going forward, we believe that the traffic growth willcontinue at an underlying average rate of about 5% per year.Moreover, new products like the Airbus A380 will be enteringservice at exactly the right time to benefit from the upturn.

How well can EADS cope with the current uncertainty?

We start with some tremendous strengths – including a currentorder book of €183.3 billion, or six years’-worth of revenues. It’s bigger than any of our competitors’.

Immediately after 11th September, we implemented a number ofconcrete actions to secure cash and profitability; these include thefreeze of all investments and hiring (excluding for the A380programme), and new cost saving plans. Thanks to the very highdegree of flexibility built into our production organisation,including the high proportion of subcontracting, flexible workagreements and contracts and short production lead times, weare well prepared to weather the storm and secure future profits.Moreover, we have a leading and growing defence business,which will partly offset the effects of the civil aviation downturn.

How do you plan to develop your defence business?

We are already a defence leader, number two in Europe. Ourdefence business (including military aircraft of all types andhelicopters, military satellites, missiles, defence electronics,secured telecommunication) has strong positions in all segmentsand produces combined revenues of €6.1 billion of revenues in

2001, representing 20% of our total revenues. Looking at ourorder book, we foresee that our defence revenues will grow bymore than 50% by 2004, including the A400M programme to bebooked this year. At the same time, the profitability of thedefence business should dramatically improve as we completeour restructuring and enter into the delivery phase for most ofour military programmes.

What are your priorities for the coming year?

Our highest priority is to continue to build shareholder value. Wewill achieve this by growing our defence business and securingour activities in commercial aircraft. This will also involve reducingworking capital, tight control of customer financing, a freeze oncapital expenditure except for the A380 programme and theactive control of all costs. Our management objective is simple:“Cost Down, Cash Up, Contracts In”.

Philippe Camus and Rainer Hertrich

Rainer HertrichChief Executive Officer

Philippe CamusChief Executive Officer

EADS 2001 Answering to our Stakeholders 9

From January to June 2001, EADS shares traded in a range of €20 – €23. This was in fact a good performance at a time when the major stock indices were moving significantly downwards.

Then, for much of the summer, it varied between €23 and €25 –reaching its all year high of €25.07 thanks to the very encouraginglevel of orders announced at the Paris Air Show.

The third phase started mid August, when the financial marketsbegan to worry about the economic outlook and airline passengertraffic and wondered whether we had reached the peak of thecycle in the aerospace segment. The share price went down to the €18/€19 level.

The fourth phase was triggered by the events of 11th September,following which the financial markets became extremelypessimistic about the economy and airline traffic. All marketssuffered, but EADS stock like that of other companies of theaerospace sector, was among the worst-hit, following the haltingof air traffic in the US and the unprecedented 30% fall in air trafficin September/October 2001.

Between 7th and 21st September, our shares lost half of their value,reaching an all time low of €9.14.This was followed by a gradualrecovery, up to €13/14 at the end of 2001 implying that acatastrophic scenario was now behind us. This level is a low price compared to historical high levels but still represents a better performance than stock market indices (CAC 40 namely).On 28th December 2001, the closing price was €13.64 – a recovery of 49.2% from the year’s low.

The average volume of trading for the year 2001 was around 1.7 million shares a day.

The continuing recovery of the economy and airline traffic at thebeginning of 2002 as well as defence growth opportunities (suchas Paradigm and A400M) have already started to support theEADS stock price. Moreover, Airbus has confirmed deliveriesaround 300 aircraft in 2002, which is close to the 2001 level (325).

The medium and long term fundamentals of the industry remainsolid with an expected underlying average air traffic growth ofabout 5% and good opportunities for aircraft replacement.

Financial Markets and Policy

Share price movements

During the year under review, the EADS share price went through

four main phases.

50

100

150

8.8Jul Aug Sep Oct Nov Dec Jan Feb MarJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

2000 20022001Dec

10.5

12.3

14.0

15.8

17.5

19.3

21.0

22.8

24.5

LOW 9.14

HIGH 25.07

BASE 100 EADS Stock Price in €

26.4

Stock price evolution as of March 2002

EADS CAC DAX IBEX

10 EADS 2001 Financial Markets and Policy

Managing challenge and securing growth

EADS 2001 Financial Markets and Policy 11

Axel ArendtChief Financial Officer EADS Executive Committee MemberEADS Board Member

Following 11th September, EADS management reacted immediately to safeguard value creation in this challenging environment.

Preservation of solid profitability and cash levelsImmediately after 11th September, EADS Finance created a new business plan based upon revised market assumptions. As a first consequence this led to an adjustment of the Airbusproduction capacity which is being implemented. Company-wide, all major investments with the exception of the AirbusA380 programme have been screened again, recruitment hasbeen frozen and additional cost saving targets have been set. AllBusiness Units have been challenged to generate and implementadditional measures in order to preserve solid profitability andcash levels.

The benefits from these additional cash and cost saving measureswill come on top of our goals set at the time of the EADS creation.We confirm our target to deliver a recurring €600 million ofadditional EBIT by 2004 resulting mainly from group-widepurchasing, production and R&D synergy projects, and we expect that by 2002 we will have achieved half of this amount.The €100 million of additional value created in 2001 (well ahead of target) vindicates this expectation. Combined with our strongpositive cash position at year-end 2001, this will enable us tocontinue with the ramp up of the A340-500/-600 production andthe development of the A380 programme – securing ourprofitable revenues of tomorrow.

Value Based Management To focus even more on cash, EADS has designed a newcorporate performance metric following the Value BasedManagement approach. The future top financial performanceindicator will be named ‘Cash Value Added (CVA)’ (definitionbelow). This will foster a company wide management culture of value creation. Beginning with this year’s planning process wewill use CVA for our internal financial target setting.

Our financial policy is driven by our commitment to creating value, which motivates the investment intoprofitable businesses and stimulates synergies whilemaintaining a healthy balance sheet.

Definition:The Cash Value Added (CVA) will be calculated by subtracting a “capital charge” – using the company’s weighted average costof capital – from the “Gross Cash Flow”. The CVA will be used as a financial target and performance measure on EADS groupand division level. CVA/Delta CVA will be an element of thecompensation evaluation for executives from 2003 onwards.

EADS today is the second-largest group in the global aerospace and defence

industry, with a unique range of products and services.

Strategic Overview

In 2001, EADS made enormous progress in its portfolio strategy of strong, balanced growthbetween commercial aerospace and defence.

This portfolio strategy means:

• Taking a leading role within the aerospace and defence Industry on a European, transatlantic and global level; and

• Pursuing new defence opportunities.

Improved Market PositionWe aim to achieve a highly visible position in all major aerospaceand defence markets around the world.

Central to this objective is our active leadership of Europeanaerospace and defence consolidation. The creation of the Airbusintegrated company has triggered increased efficiency andopportunities, whether in new commercial ventures such as the A380 or in the defence area with the A400M. The formation ofMBDA has established the world’s number two company inmissile systems. We shall continue to pursue the necessaryrestructuring of the European industry, particularly in space(Astrium and EADS Launch Vehicles), military aircraft anddefence systems activities.

Beyond Europe, we are actively building internationalpartnerships in order to strengthen access to growing markets.Such strategically-driven moves have included the acquisition by our secured telecom subsidiary EADS Defence and SecurityNetworks (EDSN) of Cogent, the UK’s leading encryption andsecure communications company, which has strengthened ourparticipation in the Bowman UK defence telecommunicationprogramme. Other examples have been the purchase of a stakein Patria, the aerospace leader in Finland, PZL Warszawa Okecjein Poland and Hawker Pacific of Australia. These market footholdshave already helped us to win export contracts worth over €2billion. And we are pursuing partnership opportunities in Russia,Korea, Japan and China, as well as in the Middle East and South America.

Expanding our access to the growing US defence market is a necessary component of our strategy. We are currently workingsuccessfully with Northrop Grumman (on Unmanned AerialVehicles (UAV) and NATO’s Alliance Ground Surveillance), withBoeing (on Theatre Ballistic Missiles Defence) and LockheedMartin (on Medium Extended Air Defence System – MEADS), as well as discussing partnerships on mission aircraft and defenceelectronics.

We anticipate that this trend will continue as we pursueopportunities in areas such as multi-mission aircraft, tankers, and missile defence.

12 EADS 2001 Strategic Overview

From the outset, we have actively soughtinternational partnerships in order tostrengthen access to growing markets.

Integrated Defence StrategyWith €6.1 billion of defence revenues in 2001, EADS is the clear No. 2 European player. Our defence businesses, includingmilitary aircraft and helicopters, military satellites, missiles anddefence electronics currently contribute about 20% of Grouprevenues. In the medium term, we aim to increase these defencerevenues by more than 50%.

Our defence strategy is focused on those mission areas we believe represent the greatest potential growth. Coordinated by its Defence Strategy Coordination Group, EADS is harnessing resources from across the company in thefollowing fields: Intelligence (C4ISR), Deterrence and PowerProjection, Survivability and Homeland Security.

Current offerings in these areas are:• Intelligence (C4ISR): the Helios remote surveillance satellites,

the Eurohawk unmanned aerial vehicle (UAV), the Rubis andAcropol encrypted mobile communication networks and the C-295 Maritime Patrol Aircraft

• Deterrence and Power Projection: the M51 ballistic missile, the Eurofighter combat aircraft1, the Scalp Storm Shadow cruisemissiles, the Meteor air-to-air missile, the A400M and the CN-235 and C-295 military transport aircraft

• Survivability and Homeland Security: the Aster and Meads missile systems.

1 In addition, EADS is a major financial investor in Dassault Aviation (45.94%) which manufactures

Mirage and Rafale fighter aircraft, and the Falcon business jets

Looking to the FutureOne year after the merger, EADS has secured a leadershipposition in its commercial and defence businesses.

Our experience confirms our strategy, which is that a balancedposition between commercial and defence lessens our exposureto market cycles and ensures steady growth over time. We canexpect to see EADS building value through organic growth,synergies between commercial and defence businesses, andthrough new alliances and acquisitions that increase our presencearound the world.

EADS 2001 Strategic Overview 13

Our ambition is to make EADS the worldleader of aeronautics, defence and space.

Jean-Louis GergorinExecutive Vice PresidentHead of Strategic Coordination EADS Executive Committee Member

Market Overview A turbulent 2001 offered both challenge and opportunity. The commercial business

faced increased pressures, and in defence, the need was confirmed for new

and technologically-advanced solutions for defence strategy and procurement.

As the global environment improves, the EADS portfolio of leading commercial

and defence products is strongly positioned to emerge stronger and more profitable.

Competitive times for our clients

14 EADS 2001 Market Overview

World Annual Traffic

(in Revenue Passenger Kilometers, RPK trillion)

Source: ICAO

The large commercial aircraft market2001 will be remembered as the first year since the Gulf War in which the long-term growth in air passenger traffic suffered a sharp setback – with obvious repercussions for aircraftmanufacturers.

Over the past 40 years, air traffic growth has averaged around7.5% per year, as the world GDP (Gross Domestic Product) anddisposable consumer income have followed a consistent upwardtrend. Deregulation allowed airlines to compete on price and,coupled with network expansion, to attract millions of newcustomers. The large commercial aircraft market is a dynamicone, driven by airlines’ changing policies on route structures,demanding a wide and continually-evolving mix of aircraft types.

Through the years, the challenge for aircraft manufacturers hasbeen to provide new aircraft which are more cost-effective tooperate and can meet tougher environmental and noiseconstraints. In the first half of 2001 the signs of a downturn in the commercial aviation industry were already visible. Annualinternational air traffic growth dropped to 2% and US airlines, for example, had already started predicting losses of up to US$2 billion.

After the events of 11th September, however, airlinesexperienced an additional sharp drop in traffic and have shedtheir excess capacity.

While it is only to be expected that 2002 will be a slow one for the industry, the longer-term prospects are positive. The USGovernment has acted swiftly and has decisively limited damageto airlines by offering, amongst other measures, a US$15 billionrescue package (of which US$5 billion were cash injections and US$10 billion were guarantees) and passenger numbers haverecovered more quickly than expected. Meanwhile, major USairlines have reported “bottoming-up” of traffic. While in October2001 air traffic declined to 78% of the previous year’s, it climbedback to 85/90% in December 2001.

A solid recovery is expected, but to predict its timing is still adelicate task. On the one hand, US consumer debt andunemployment levels pose risks. On the other, the US economyis expected to return to health during 2002 and customers’confidence in the air transport system is returning. This willinevitably lead airlines, once they have rebuilt their cash positions,to re-equip, since much of the capacity they have shed in thedownturn consisted of older aircraft, due in any case forreplacement. Airlines are also likely to continue the trend towardsharmonised fleets consisting of a smaller number of types.

In such an environment, the market-leading Airbus product family– covering all types of routes from ultra long-haul to short-haulwith latest-generation designs, outstanding performance, highlycost-effective profiles and extensive operational commonality –should enjoy considerable competitive advantages.

RPK trillion

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

19751970 1980

1970–79

11%

1980–90

5.8%

1991–97

5.8%

1998–2000

7.1%

1985 1990 1995 2000

Oil crisis

Oil crisis &

Iran/Iraq war

Gulf war

Asian crisis

EADS 2001 Market Overview 15

Total US and Europe Defence Procurement Budget

Source: NATO, JP Morgan and others

EC135 on a rescue mission Aircraft mission planningAirbus A310 freighter

The defence marketThe September events have accelerated a number ofdevelopments in the defence environment, re-definedtransatlantic strategic relationships between the US and Europe,and generated unique and technologically advanced needs forgovernments and defence ministries throughout the world.

Following a US government decision prior to 11th September, the US defence budget for 2002 has been raised towardsUS$334 billion. Further increases are expected from the UnitedStates, including an investment of US$13.7 billion to responddirectly to the attacks. Still more raises – up to US$48 billion – inUS defence budget are expected for the budget year 2003 tocarry on the transformation of defence.

Now more than ever, Europe and many other governments are increasing their efforts to analyse their role in global andhomeland security. There are a number of factors that will

influence the market for defence equipment and services in theshort and medium term future.

First, there is a stronger awareness of European gaps in terms ofthe capabilities required of national armed forces. There will be an increased emphasis on homeland protection (better C4ISR,border surveillance, protection against NBC threats, perhapsincluding some form of ballistic missile defence), force projectionand deployment – the ability to mount remote operations and tosupply and reinforce troops far from their home bases. This hasevident implications for the demand for military transport andmission aircraft, light, medium and heavy alike. In particularmilitary transport aircraft and military helicopters will be the keystrategic segments to ensure logistics support in the new force projection policy.

Also relevant to power projection, the importance of advancedtechnology has been confirmed by the conflict in Afghanistan,which has demonstrated the vastly increased ability of forcecommanders to attack targets with total precision – bothenhancing the effectiveness of attacks and minimising casualties.It has again underlined the value of intelligence derived fromsatellites, unmanned aerial vehicles (UAVs) and unmannedcombat aerial vehicles (UCAVs), real time command and controlsystems, smart munitions and cruise missiles for deep strikes.

Together with the trend to increased system sophistication there will be a request to improve integration, flexibility andinteroperability. The key will be the ability of complex systems to provide a seamless flow of information at all stages fromintelligence gathering through decision-making andimplementation as well as throughout all systems in theoperational theatre. Electronic warfare and secured, deployabletelecom are amongst key assets to be procured.

Polyphem missile

16 EADS 2001 Market Overview

In addition, the market driver that remains is the pressure onmanufacturers to provide ever-increasing value for money,despite the growing complexity of their products. This altogethercould increasingly lead to further consolidation within themarketplace, as well as to increasing numbers of internationalpartnerships. In addition, we expect many armed forces todiscover the virtues of outsourcing repair and maintenanceactivities, in the drive for cost-effectiveness across all their operations.

We believe that EADS’ “young” defence portfolio is well-suited tocontribute to and to benefit from virtually all these trends in thesphere of national and international defence.

Other commercial marketsCivil Helicopters The world-wide market for civil helicopters has been growingduring 2001 from 474 deliveries in 2000 to 495 in 2001. This rangesfrom helicopters for corporate executives and diverse commercialapplications to offshore oil operators and state agencies includingpolice forces, medical services and fire fighting teams. Especiallyafter 11th September, the demand for parapublic helicopters hasincreased significantly. Civil helicopter markets should remainstrong over the next five years.

Market Overview continued

EADS 2001 Market Overview 17

Civil Space 2001 saw difficult conditions in the field of space activity.European institutional budgets were stable or at best slightlyincreasing, and commercial orders were below last year’s level forseveral reasons: first, the slower-than-expected development ofthe market for new telecommunications applications likebroadband; second, the ongoing consolidation and restructuringprocess among major operators, the consequence of which was areduced or delayed demand for new satellites. In this market,space manufacturers, including Astrium, the 75% controlledEADS subsidiary, generally recognise an over-capacity situation in the telecom satellite market. The global economic environmentin 2001 affected overall demand for telecom satellite capacity. The launcher segment was therefore affected by a decline in the total number of commercial launches as well as from heavycompetition and pricing from launchers supplied from easterncountries and operated by US companies.

New ways of thinking are second nature to companies whodepend on developing and using leading-edge technologies.

But at EADS with our multicultural organisation, this adaptabilityand openness to change isn’t just a matter of technology; it’s fundamental to the way we approach our whole business, our customers and our other stakeholders. And it’s driving a process of change that is already achieving results.

Improving the organisationFrom day one, EADS has been aware that opportunities could be created by sharing the resources, experience and know-howof its Business Units. This process – Merger Integration – hasproved to be a principal building-block for the Group’s future andhas already produced substantial added value.

Some 670 Merger Integration projects including 276 with directimpact on EBIT have already been implemented to strengthen thetransfer of best practice and the sharing of means, tools andknowledge between Divisions and Business Units. These includeinitiatives in Research and Technology, manufacturing,

engineering, purchasing and product support – and during 2001,they have already delivered value creation of more than €100 million additional EBIT – over 60% above target. Our goal isto achieve recurrent additional EBIT of over €600 million by 2004.

And our new marketing and sales operation – EADS International –is just one more example of the strengths of our merged operations.

Sharing knowledge, improving productsAnother major advantage for the Group comes from its ability to make use of technologies across national and Divisionalboundaries. Increasingly, this is being put into practice, withAirbus skills, for example, being used to develop and produce the A400M.

We are also among the global leaders in partnerships, working closely and effectively with companies ranging from BAE Systems, Thales, Finmeccanica in Europe to NorthropGrumman and Boeing in the US; sharing information, risk andtechnology in order to produce better solutions for the customerat a competitive price.

Our ability to adapt swiftly and effectively to change

adaptable

Astrium – Re-EntrySystem IRDT

Airbus A300-600ST‘Beluga’

18 EADS 2001 Adaptable

Eurofighter

EADS 2001 Adaptable 19

Keeping Airbus on course – and climbingThe appalling events of 11th Septemberimpacted on the whole world, acceleratingthe onset of a global economic recession,and aggravating the cyclical downturn inthe civil aeronautical sector in particular.Thanks to its built-in organisationalproduction flexibility, Airbus has been ableto react quickly to this new environment.

First, Airbus conducted with its customersan in-depth analysis of its order book, toconfirm that it is made up of orders fromcustomers who are still capable of takingdelivery of their aircraft as scheduled. The company also decreased its customergross financial exposure for the thirdconsecutive year, thus ensuring greaterflexibility to cope with the current difficultperiod.

Next, Airbus reviewed its production plansfor 2002 and 2003. Having foreseen a cyclical downturn long before the eventsof 11th September, Airbus had alreadybegun to slow production ramp-up in thesummer of 2001, and currently expects todeliver approximately 300 aircraft in 2002,whereas it was previously planned toincrease annual production rates up to 400 aircraft.

In a year of dramatic change for the aerospace and defence industries, the ability

of EADS to adapt its operational approach swiftly and effectively has already proved

its value.

20 EADS 2001 Adaptable

A330 Air Tanker version

Engineer servicing an A310 engine

This is not a drastic reduction from the2001 level (325), but rather corresponds toa freeze of production rate. Organisationalflexibility has allowed Airbus to adapt tothis level with no dramatic effect on itsworkforce, whose valuable skills will beessential to ensure its continued success inthe anticipated recovery.

Using established skills in a new contextEADS is determined to grow the proportionand importance of its defence activitieswithin its business portfolio – adapting to a global environment in which securityand defence issues will be emphasisedmuch more than during the 1990’s.

The A400M, the large European militarytransport aircraft representing the biggestcontract for EADS since its creation, is anoutstanding example of our ability toadapt to these changing needs. TheA400M transforms civil technology into a military product, proving our ability toachieve synergies through cross BusinessUnit activities, and uses the same flexibleproduction system as used for Airbus.

At the same time, the A400M is able tomeet the requirements of eight nationsand their armed forces, as well as of otherfuture customers. And the product itself isvery adaptable: it can be used for thetransport of troops, materials or largeequipment, such as helicopters or armedvehicles.

EADS 2001 Adaptable 21

Envisat is placed in an Astrium anechoicchamber to check compatibility of thevarious radio frequencies

EADS is committed to the creation of maximum value for its stakeholders – customers, shareholders, employees, localcommunities and the wider national and international public.

To achieve that aim we need to understand our stakeholders,their businesses, their needs and their objectives. And our trackrecord of doing precisely that is unsurpassed in the industry.

The A380 has been designed in consultation with over 80different airlines, following research among commercial airlinesmanagers, pilots, airport authorities – and even passengers. Ourcivil aircraft are not only state-of-the-art; they are also backed bycustomer service oriented support.

Our family of helicopters, now complete, is designed to covervirtually all customer needs from civil and parapublic transport to military and naval attack – while in the field of military aircraft,we can offer not only the most advanced machines, but alsointegrated logistic support and training simulators.

The military tactical transport aircraft A400M was conceived not simply as a result of a military specification, but tailored to fit a wide variety of defence requirements, answering the demandfor high payload, long range and high cruise speed.

In the field of mission aircraft, we draw on all existing knowledgeand capabilities within the relevant business units. This “one face to the customer” approach creates clear communication – and best technological solutions into the bargain. One example:the bid to supply Maritime Surveillance Aircraft to the US CoastGuard, where all contenders propose to make use of the EADSaircraft CN-235 as the fixed-wing platform.

Other examples of major European projects in which EADS playsa key role to meet new market requirements on the military side:• the Skynet 5 satellite programme, in which Astrium will offer a

new generation of secured telecommunications services to theUK MoD

• the UK MoD Future Tanker aircraft Bid offer, for which theEADS solution meets all the Air Force specifications.

And as a global company with a worldwide reach and state-of-the-art products, EADS Business Units can stay close to theircustomers, continuously meeting demands and offering tailor-made solutions. Eurocopter, for example, has created a globalnetwork of subsidiaries to keep in direct, day-to-day contact with its individual regional markets.

A400M

What do customers want today?How can we listen to their needs most effectively?What are they likely to need tomorrow?

market driven

First flight Airbus A340-600

22 EADS 2001 Market Driven

Tiger HAP

EADS 2001 Market Driven 23

From mass-market air travel to the most advanced space systems, EADS is staying

ahead of market trends to deliver more of what our customers want in a more

cost-effective form.

The latest programmes such as the A380,the A340-500/-600 and the future militaryA400M are all on track and running on schedule.

24 EADS 2001 Market Driven

Hellas obstacle warning system forhelicopters

The ongoing success of Airbus has been based on the company’s ability to develop new programmes adapted to market demand.

Airbus now offers a complete range ofcivil aircraft stretching from 100 to more than 500 seats in capacity, with a uniquedegree of interoperability and commonservicing requirements. This choice,combined with the reduced operatingcosts of Airbus aircraft and their ability to conform to the strictest environmentaland safety standards, is in line withcustomers’ priorities as confirmed by thecurrent slow-down, since it allows airlinesto fine-tune their fleet organisation tooptimise efficiency.

A market opportunity that’s literally out of this worldSatellite-based navigation, positioning andaccurate timing information is increasinglysignificant in many sectors of commercialactivity – and the market potential is huge.Estimates suggest that over the 20-yearperiod from 2005 (beginning of thedeployment phase) the European marketfor satellite user equipment and relatedservices could be worth around €200 billion. The positioning signalsavailable today come from the UnitedStates’ Global Positioning System (GPS)and, to a lesser extent, the Russian GlobalNavigation Satellite System (Glonass).

The European Union has identified a needfor a global navigation service underinternational civil control, and the result isGalileo, a proposed satellite navigationsystem. The system will be interoperablewith GPS and leveraging positioninformation into other systems extendsthe benefits of Galileo. For example, theintegration of a Galileo receiver into aGSM handset will provide access to awhole range of personalised ‘positionrelated information services’.

Galileo is a major opportunity for thespace industry in the widest sense.Through Astrium, with its extensiveexperience of satellite navigation, EADS is playing a major role in the design anddevelopment of the system.

EADS 2001 Market Driven 25

EC130

Columbus research laboratory for theInternational Space Station (ISS)

Both were designed for military purposesand neither system can provide the qualityand reliability of service to meet moderndemands for safety, efficiency andcompetitivity: Glonass currently operatesonly around half its satellites and the GPSsignal is deliberately and variablydowngraded according to US strategicimperatives.

EADS today is working on some of the most advanced projects in our industry; among them the A380, the Eurofighter, theA400M, the Herschel space telescope and the new generationram jet air-to-air missile.

For tomorrow, we have unique resources in our Research andTechnology Development activities – which are focused onstrengthening our core competencies and delivering improvedbottom-line benefits for customers.

A structure that delivers resultsOperating both through the recently-established EADS Researchand Technology Network (tasked with achieving synergiesthroughout the Group) and the Corporate Research Centre, our research activities are currently concentrated on five coretechnologies which have been identified as major competitivestrengths.

These are:• Advanced materials, structures and manufacturing for

cost-effective production;• Electronics, microelectronics/optronics and microwave

technologies to provide integrated, “smart” products;• The physics of flight, propulsion, energy and acoustics,

to aid the production of environmentally friendly aircraft and high performance vehicles;

• Systems and related services to create robust intelligent systems which will extend our business opportunities; and

• Information and software technologies and advancedprocesses which will address economic and cost issues through“virtual product engineering”.

The EADS Corporate Research Centre with its national centres and its Paris central management is increasingly seen by European Governments and research establishments as amodel for international integration which respects nationalstrengths. Research co-operation across Europe and acrossGroup activities is strengthening our ability to deliver theadvances in technology that our customers demand.

Pushing the boundaries of technology and new thinking

innovative

NH90

MAKO

26 EADS 2001 Innovative

ISS

EADS 2001 Innovative 27

EADS has a unique heritage of innovations – including the first turbine helicopter,

the shrouded helicopter tail rotor (Fenestron), the first twin-engined widebody jet

airliner, the first fly-by-wire systems for commercial aircraft and military helicopters

and the application of lightweight carbon fibre composites in Airbus.

And tomorrow is another day. . .

28 EADS 2001 Innovative

Maintaining leadership in researchWe are now moving to create the EADS Common Research Programme2002–2004. In the short term, this willallow us to select and refine our portfolioof projects in order to optimise thecreation of added value.

In 2002, we shall continue to apply ourR&T abilities to improving productivity,performance and environmentalcompatibility for the benefit of ourcustomers. We will also continue to take an active role in the InternationalAerospace Quality Group (IAQG).

Looking further ahead, we see an ever-growing demand for improvements insafety in many aerospace product areas,and we shall be following a structuredapproach, leveraging our considerableintellectual capital, to provide theappropriate technology-based solutions.

Safeguarding the futureEurofighter is the most advancedmulti/swing-role combat aircraft for thedecades to come. By fully exploiting theunique direct voice input (DVI) principle in latest-generation fighter aircraft, theEurofighter sets new standards in “care-free handling” and an optimum human machine interface.

Airbus laser welding

Aerodynamic study in a wind tunnel

State-of-the-art avionics, the ‘glasscockpit’ design, and the latesttechnologies for electronic self-defence,weapon deployment, navigation, systemmonitoring, and communications/data linkensure a high degree of efficiency. Themultiple redundant digital Flight ControlSystem (FCS) in conjunction with twonewly developed high-performanceengines safeguard both excellent flightperformance and reliability.

Uncovering the secrets of the UniversePioneering research and development by Astrium is set to revolutionise spacetelescopes, allowing us to see further thanever into deep space, and into the mists of time.

The European Herschel SpaceObservatory, to be launched in 2007, willcarry an Astrium-built 3.5-metre-diameterprimary mirror, the largest imagingtelescope ever launched, and will bring us closer to understanding how theearliest stars and galaxies formed about 13 billion years ago.

This has been made possible by the use of silicon carbide (SiC), a highly stablematerial which allows the manufacture ofvery large ultra-lightweight mirrors. It isthe result of investments made by Astriumin joint research and developmentactivities carried out with Boostec inFrance since 1992.

Mars Express with Beagle 2

EADS 2001 Innovative 29

Military Transport Aircraft

Alberto Fernández

Airbus

Noël Forgeard

Business StructureWith the streamlined management structure that EADS has set up, the Heads

of five operating Divisions – Airbus, Military Transport Aircraft, Aeronautics,

Defence and Civil Systems, Space – report directly to the CEOs. Each of the five

operating Division Heads is responsible for profit and loss as well as for meeting

profitability targets.

EADS CASA(Military Transport Aircraft)Alberto Fernández

AirbusNoël Forgeard

Executive CommitteeThe CEOs are supported in theiroperational tasks by an ExecutiveCommittee made up of the Heads of eachoperational Division and of the Heads ofthe three major functions of the Company.Such Executive Committee chaired by theCEOs is made up of 11 members.

Members of the Executive Committee

30 EADS 2001 Business Structure

Gustav HumbertAirbus ChiefOperating Officer

Thomas EndersDefence and CivilSystems Division

Jean-LouisGergorinStrategicCoordination

Jean-Paul GutEADSInternational

François AuqueSpace Division

Dietrich RussellAeronautics Division

Back row (left to right)

Axel ArendtChief FinancialOfficer

Rainer HertrichChief ExecutiveOfficer

Philippe CamusChief ExecutiveOfficer

Alberto FernándezMilitary TransportAircraft Division

Noël ForgeardAirbus Presidentand ChiefExecutive Officer

Front row (left to right)

Aeronautics

Dietrich Russell

Space

François Auque

Defence & Civil Systems

Thomas Enders

EADS Military AircraftAloysius Rauen

EurocopterJean-François Bigay

EADS ATRJean-Michel Léonard

EADS EFWDierk Minke

EADS Sogerma ServicesYves Richard

EADS SocataPhilippe Debrun

Astrium Antoine BouvierJoseph KindEvert DudokChris Chant

EADS Launch VehiclesPhilippe Couillard

EADS CASA EspacioPedro Mendez

EADS Space ServicesUlrich Aderhold

EADS SodernHenri Dugré

EADS CilasJacques Battistella

Systems and Defence ElectronicsStefan Zoller

EADS ServicesJacques Vannier

MBDAFabrice Brégier

EADS LFKWerner Kaltenegger

EADS TelecomJacques Payer

EADS 2001 Business Structure 31

AIRBUS

millions of euros 2001 2000** variation

REVENUES 20,549 14,856 +38%

EBIT* 1,655 1,412 +17%

ORDER INTAKE 50,279 34,158 +47%

ORDER BOOK 156,075 104,387 +50%

in number of aircraft 2001 2000

DELIVERIES 325 311 +5%

ORDER BOOK 1,575 1,626 –3%

* pre-goodwill amortisation and exceptionals

** pro forma, excluding Airbus UK

Airbus

• 1,575 aircraft in order book

• 85 firm orders and 12 customerscommitments for A380

• A380 development programme ontrack and on budget

• A340-500/-600 to enter service in 2002

• A318 readied for test flight

• ACJ corporate jetliner takesincreasing share of its market

In its first full year as an integrated company, Airbus continued to achieve healthy

commercial results. Airbus delivered a record 325 aircraft, captured a 61% share of the

global market in terms of order value and strengthened its profitability pre-R&D.

At the same time Airbus took immediate actions to preserve cash and margins in the

current commercial aviation downturn.

32 EADS 2001 Airbus

Airbus A340-600

2001 ResultsAirbus has been operating effectively on an integrated basis since the beginning of 2001and its results are 100% consolidated in EADS accounts for the first time in 2001. Mainly due to this consolidation, revenues increased by 38%. On a comparable basis,they increased by 10%.

Airbus delivered a record 325 aircraft – 257 single-aisles and 68 wide-bodied and long-range aircraft, generating revenues of €20.5 billion – making 2001 the first year in history in which its revenues have exceeded €20 billion.

This continued healthy commercial result was achieved despite a general economicslowdown, which deteriorated significantly after 11th September.

New ordersWhile the number of units ordered for Airbus was lower than the 2000 peak (520 grossorders), Airbus won – in line with its forecasts – 375 gross orders representing 53% of the market in terms of aircraft units, and an impressive 61% market share in terms ofvalue. Firm orders booked in 2001 comprised 175 A320 family aircraft, 61 A300/A310widebody twins, 54 long-range A330/A340s and 85 for the future A380.

The events of 11th September naturally produced a rapid change that radically affected the airlines. A sharp downturn in air traffic numbers put most of them in a difficultsituation. Airbus decided to adopt a very conservative approach and to write off 101orders from its order book – mostly with airlines in bankruptcy.

€156bnorder book

€20.5bnrevenues

Noël ForgeardAirbus President and Chief Executive OfficerEADS Executive Committee MemberEADS Board Member

EADS 2001 Airbus 33

A318 Assembly line

However the order book of 1,575 aircraft worth €156.1 billion at the end of 2001 is wellahead of the competition for the second year running. This gives Airbus more thanfive years of production ahead at the expected rate of 2002. On the basis of detaileddiscussions with individual customers, Airbus expects to deliver approximately 300 aircraft in 2002.

Key events of the yearSince July 2001, Airbus has been an integrated, stand-alone company with a singlemanagement team. This has represented a major step forward for the company, whichhas focused on getting the organisational structure up and running effectively.Integration is now fully operational, with single reporting lines and an impressive teamspirit, Airbus is now a fully-fledged enterprise in its own right.

By 2004, Airbus will contribute €350 million to the EADS €600 million additional EBITtarget from Merger Integration value creation.

Airbus is also actively managing the downturn in the post-September civil aviation market, and has taken company-wide measures to maintain profitability pre-R&D. Theseinclude the stabilisation of deliveries at about 300 units, a pause in recruitment (excepton the A380 programme) and the implementation of a further number of ongoing cost savings plans. These steps, combined with highly flexible production systems,should allow Airbus to maintain in 2002 production costs per unit, despite the decreasein deliveries. The overall Airbus target is to reduce costs by €600 million per year:€200 million through R&D reductions on non-critical programmes and €400 million inoverhead cost savings.

Moreover, at a time when customers may require more financing facilities, Airbus has theflexibility to make decisions to support its customers on a case-by-case basis. Indeed, forthe third consecutive year, Airbus has reduced its customer financial gross exposuredespite the increase in deliveries, and now has the flexibility to increase this exposure, ifneeded, under tight control.

Airbuscontinued

Product Milestones

ACJIncreasing demand for flexibility and security are favouring the Airbus Corporate Jetliner (ACJ), of which Airbus has now sold 30 units into a growing market. Uniquely, the ACJ can be converted back to normal commercial format for airline use, and theaircraft is attracting interest from airlines willing to offer high-level corporate service tomajor customers.

A318In mid January 2002 the 107-seat A318 successfully completed its maiden flight. The A318 is the latest addition to Airbus range, and is designed to serve markets withfrequent services on low-density routes. As part of the Airbus 320 family, offeringidentical conditions of comfort and operation, it allows customers to manage their fleets more flexibly and to optimise load factors. Airbus has firm orders for 114 A318s,which will begin to enter service in 2003.

34 EADS 2001 Airbus

Airbus A320 family

Gustav HumbertExecutive Vice PresidentAirbus Chief Operating OfficerEADS Executive Committee Member

A340-500/-600The A340-500 and -600 are the latest ultra long range, high-capacity additions to Airbus’portfolio of products. Designed in consultation with airlines around the world, they offer new levels of comfort and refinement as well as lower operating costs and betterrevenue potential than their competitors. Airbus has firm orders for 62 of these aircraft.

Airbus currently has three A340-600 aircraft in flight test, where they have been meeting(and frequently surpassing) expectations. Certification is due in May 2002, and entryinto service in June 2002. The first A340-500 flew in February, should be certified inOctober and is expected to enter service in November 2002.

EADS 2001 Airbus 35

A330 and A340 final assembly line

Airbuscontinued

36 EADS 2001 Airbus

A380The A380 programme to develop and manufacture the world’s first 555-seat aircraft is running on time and within budget, particularly with reference to the objective ofmaking the first deliveries in first quarter 2006. Total development costs have been heldat US$10.7 billion, and the financing is almost entirely in place. Risk-sharing partnershave been found for up to US$3.1 billion of non-recurring costs.

More than 4,000 people are currently working on the project, and this will rise to a maximum of 6,500 by the middle of 2002. Offices have been built and facilitiesincluding the final assembly line sites in Toulouse and Hamburg are under construction.

Airbus firmly believes that the civil aviation market will continue to grow strongly in themedium and long term, and is convinced that it will demand this aircraft for itsperformance. This is confirmed by its customers who placed 85 firm orders during the year (of which 37 came after the events of 11th September), as well as a further 12 commitments which are expected to be turned into orders in 2002. Since the A380will be the youngest product on the market, Airbus will be able to integrate the lateststandards of security. Moreover, it will be delivered at a time when the civil aviationmarket should have already recovered.

A380 interiorsAbove: Airbus A380

Top Left: A320 family cockpit

Below left: Airbus A318

OutlookDownturn in the airline industry notwithstanding, Airbus believes that it is exceptionallywell-positioned to meet the present and future challenges of the market place.

Airbus has a unique range of products, stretching from 107 to 555 seats. Each on its ownoffers the customer solid advantages of cost and performance; together, they form a family with a high degree of commonality and interoperability, for more efficient fleetoperation that can be responsive to market changes. Customers are increasingly focusingon the economy and environmental friendliness of aircraft; and also on these criteria, theAirbus offering is exceptional.

Airbus also has a highly efficient work force. More than 45,000 employees are to deliver300 new aircraft in 2002, as well as continuing to develop three major new programmes,giving Airbus a dramatic advantage over the competition. Staffing arrangements andconditions of employment are flexible.

This flexibility, the complete range of Airbus products meeting market requirements, and its robust backlog are key assets for the successful management of the current civilaviation downturn.

EADS 2001 Airbus 37

The Division recorded revenues of €547 million; an increase of 73% on the previous year.This was mainly due to new deliveries of the C-295 and to the conversion of two A310sto VIP configuration for the Spanish Air Force, and was achieved with a small increase instaff (from 3,548 to 3,573).

Even more impressive was the rise in order intake from €0.5 billion to €1 billion – with the total order book growing from €0.9 billion at the end of 2000 to €1.3 billion by the end of 2001. This represents more than two years’ production for the Division.

Military TransportsHeavy airlifters: A400MThe inter-governmental Memorandum of Understanding to develop the advancedA400M military heavy transport aircraft was signed at the Le Bourget Air Show in June2001, and on 18th December 2001, eight nations signed a contract for the developmentand production of 196 aircraft – Germany (73), France (50), Spain (27), United Kingdom(25), Turkey (10), Belgium plus Luxembourg (8) and Portugal (3). The contractenforcement is expected this year. The Division will provide technical and industriallogistic support (ILS) leadership on the project – in which EADS has an 89.5% stake(including 100% Airbus consolidation) – as well as being responsible for the finalassembly line at San Pablo, near Seville, Spain.

Medium Military Transport AircraftThe order for the Polish Air Force signed on 28th August 2001 for eight C-295 aircrafttogether with product support services was a major step forward in the positioning ofthis product as the world’s leading new-generation medium military transport. EADSCASA raised its stake in PZL Warszawa Okecje, the main Polish aeronautic company, to 51%, thus increasing the overall industrial presence of EADS in east Europe.

MILITARY TRANSPORT AIRCRAFT DIVISION

millions of euros 2001 2000** variation

REVENUES 547 316 +73%

EBIT* 1 (63) –

ORDER INTAKE 993 493 +101%

ORDER BOOK 1,320 873 +51%

* pre-goodwill amortisation and exceptionals

** pro forma

Military Transport Aircraft With an exceptional rise in revenues and orders, the Division confirmed its leadership

position in the field of medium military transport aircraft, and is preparing for the

A400M programme. Aerostructures won considerable business from other

important manufacturers.

• 8 countries sign up for the A400Mheavy military transport programme

• Contract signed for 8 C-295 for the Polish Air Force and acquisitionof 51% in Polish PZL WarszawaOkecje

• CN-235 ordered for the French Air Force

• The CN-235 selected as the fixedwing platform for the US CoastGuard’s Deepwater programme

38 EADS 2001 Military Transport Aircraft

A400M

The Division´s CN-235 and C-295 have achieved a market share of 71% in year 2001.The first three C-295 aircraft were handed over to the Spanish Air Force, and fourCN-235s were delivered under an Industrial Collaboration Programme with Turkey.

Mission Aircraft and DerivativesIn February 2001, the Division flew for the first time the FITS (Fully Integrated TacticalSystem) on board a modified CN-235 prototype aircraft. This system, a major innovationfor a new generation of Maritime Patrol, ASW (Anti Submarine Warfare) and relatedmission aircraft, has been of capital importance for the success of the Division.

In March, the FITS-equipped C-295 ASW Maritime Patrol aircraft was selected as thewinner of the competition for the United Arab Emirates Navy’s Shaheen 1 project.

Also relevant is that the CN-235 has been selected as the fixed-wing platform by all threepotential main contractors – Boeing, Lockheed Martin and RAIS (Raytheon AircraftIntegration System) – for the US Coast Guard’s Deepwater maritime patrol programme.Moreover, the FITS system is included in the bids presented by Boeing and LockheedMartin. This contract is of major importance, for both qualitative and quantitativereasons.

Within the A330 Airtanker consortium, the Division has presented a bid to the UK Royal Air Force for the FSTA (Future Strategic Tanker Aircraft). This programme has a huge economic magnitude – around €3 billion for aircraft – and under the PFI (Private Finance Initiative) will provide the Royal Air Force with air refuelling servicesfor 27 years.

The Division has also a substantial level of facility in aerostructures for various aircraftmanufacturers.

OutlookIn 2002, we expect to begin development work on the A400M, as well as the selectionof the prime contractor for the Deepwater programme. Following a successful 2001, we expect even better results in the coming year, with EBIT continuing to improve andthe order book increasing substantially.

Alberto FernándezEADS CASA Chief Executive OfficerHead of Military Transport Aircraft DivisionEADS Executive Committee Member

EADS 2001 Military Transport Aircraft 39

€1.3bnorder book

€0.5bnrevenues

C-295

Mission system FITS (Fully IntegratedTactical System)

AERONAUTICS DIVISION

millions of euros 2001 2000** variation

REVENUES 5,065 4,704 +8%

EBIT* 308 296 +4%

ORDER INTAKE 5,315 8,322 –36%

ORDER BOOK 13,722 13,067 +5%

* pre-goodwill amortisation and exceptionals.

** pro forma

AeronauticsRevenues rose by 8% to €5.1billion. Eurocopter consolidated its position as the global

market leader in civil helicopters as well as winning key military export orders. Military

Aircraft continued development and preparation for the first deliveries of the Eurofighter.

Demand for regional and light aircraft remained healthy. And our maintenance and

conversion activities continued to make a valuable contribution.

• Eurocopter share of the civilianmarket rises to 57%

• Over 500 military helicopters in order book; major exportsuccesses for Tiger and NH90 in 2001

• ATR Integrated created

• A €1.1 billion contract is signed for Eurofighter training aids

40 EADS 2001 Aeronautics

Engine maintenance

The Aeronautics Division achieved revenues of €5.1 billion with all Business Unitscontributing to this increase. New orders at €5.3 billion were strong even after theexceptional year of 2000.The order book stood at a healthy €13.7 billion at the year end, covering the next three years’ business activities. Our involvement in three majorpan-European defence programmes – the Eurofighter combat aircraft and the Tiger and NH90 military helicopters – and our growing ability to offer comprehensive support packages for helicopters, fighters and transport and mission aircraft providea solid foundation on which to achieve our targeted growth in the defence sector.

EurocopterIn the civil and parapublic markets, 495 helicopters were delivered worldwide, of whichEurocopter (the market leader), accounted for 280 – raising its market share from 51% to57%. This exceptional achievement is the result of Eurocopter’s product policy ofcontinuous improvements to meet customer requirements. Latest addition to theproduct range during the year was the EC130 light single helicopter, one of the quietesthelicopters in the world. Development of the EC145, an extensively modified version ofthe BK117, progressed well during the year.

In 2001, the market for military helicopters amounted to some US$7 billion andEurocopter captured 25% of the export market for military helicopters. With thedeliveries of NH90, Tiger and EC725 programmes, Eurocopter aims to capture about20% of the market by 2008. Excluding the US, this will represent some 40% of thedefence helicopter market.

Major developments in the year included the preparations for serial production of the Tiger 2-seat combat helicopter for the French and German armies. In December, the Australian Government placed an order for 22 Tigers, underlining this machine’sexport potential. This €0.7 billion contract will be booked in 2002.

Dietrich RussellExecutive Vice PresidentHead of Aeronautics DivisionEADS Executive Committee Member

EADS 2001 Aeronautics 41

€5.1bnrevenues

€13.7bnorder book

Eurofighter

The NH90 – a new-generation transport helicopter for Army and Navy, developed in aprogramme involving France, Germany, Italy and the Netherlands – is also getting readyfor serial production, with the first deliveries scheduled for the end of 2004. The NH90also achieved a major export success worth €0.9 billion in total, with Portugal orderingten and the Nordic Standard Helicopter Project involving 52 aircraft for Finland, Swedenand Norway, for which part of the order will be booked in 2002.

There are currently some 9,000 Eurocopter machines being operated by 2,065customers in 133 countries. This creates a healthy market for our customer supportactivities which represented 34% of our revenues in 2001, and whose availability, in turn,makes our aircraft more marketable in both new and second-hand markets.

Military Aircraft:EurofighterEurofighter is the state-of-the-art, multipurpose combat aircraft for the coming decadesas well as an engineering project of key significance for its European partner countries,which have ordered 620 units. EADS, with a 43% stake in the programme, producesmiddle sections in Germany and starboard wings in Spain for all aircraft and assemblesthe German and Spanish aircraft. During 2001, we focused on the final assembly andequipping of the first German Instrumented Production Aircraft, which will be deliveredin the second half of 2002, and on the first production aircraft for Spain. In April, the contract was signed between the Eurofighter management company and Netma, thecustomers’ organisation, for the design, production and support of the EurofighterAircrew Synthetic Training Aids (ASTA). We are actively marketing the Eurofighter topotential customers in Europe and Asia. Development of the multi-role functions of theaircraft continues and will be integrated in future contract tranches.

Tornado and other Fighter Upgrade ProgrammesIn September 2001, a contract for the basic integration programme of avionics for the Tornados of the German and Italian air forces was signed by the Panavia Tornado consortium and Netma. At the same time, we signed a contract for the Royal Air Force’s Tornado upgrades, and are looking to extend this type of service to other Tornado operators.

Other upgrade activities are being undertaken for the Hellenic Airforce’s F-4E, the German F-4F, and for the Spanish Air Force’s F-5B and F-18 Hornets. On the basis of this experience we have submitted, together with Lockheed Martin, a proposal for the modernisation of the Egyptian Air Force’s Phantoms.

The Mako Programme and Future ProjectsThe Mako programme is aimed at developing a next-generation family of high-performancetraining and light combat aircraft. Thirteen risk and revenue sharing partners have nowembarked on the definition phase based on a cooperation agreement with the UAE.

In November 2001, six countries mandated Alenia, BAE Systems, Dassault Aviation,EADS and Saab to jointly undertake the European Technology Acquisition Programme(“ETAP”). This programme will identify, develop and evaluate the technologies which willbe required for flying weapons systems in the 2020s.

Other initiatives included an initial contract to develop a Global Positioning System (GPS)-controlled system for the more accurate targeting of drops from cargo aircraft at high altitudes, and the ground-testing of Autopol (automatic object recognition for police helicopters).

Regional Aircraft2001 saw the full integration of the ATR business in which we hold a 50% interest while ourItalian partner Finmeccanica holds the remaining 50%. The new structure will allow us tosubstantially lower operational and production costs to better meet the needs of the turbo-prop market. We are already seeing benefits with EBIT which turned positive in 2001.

Aeronauticscontinued

42 EADS 2001 Aeronautics

Above: Tiger

Top left: ATR: Close up front view

Bottom left: TBM 700

Top right: Eurofighter assembly line

EADS 2001 Aeronautics 43

Twenty of the new ATR 42/72–500 family of aircraft were delivered in the course of theyear. The down-turn of commercial aircraft business and the events of September 11thaffected the turbo-prop aircraft less than the large airliners – being the low-cost alternativeon short-haul operations. In addition to new aircraft ATR has also marketed 23 second-hand aircraft during last year and has provided extensive product support to its worldwidefleet of over 600 aircraft with more than 100 customers operating in 65 countries.

Light AircraftEADS Socata increased its revenues by 10% during 2001. This unit’s activity is dividedroughly 50/50 between Aerostructure and General Aviation, with the latter growing at ahigher rate. The USA accounts for 60% of revenues, and we are developing ourdistributor network in order to increase penetration in this market where the TBM 700aircraft has been very successful over the last years. During the year, we signed asignificant agreement with Dassault, under which we became a risk-sharing partner inthe FNX business jet programme.

Maintenance and ConversionEADS Sogerma Services is initiating a facilities network for aircraft and componentsmaintenance, spanning an area from Bordeaux over the Mediterranean and Gulf regions.The US business is developed through the Lake Charles maintenance operation facilitywhich was opened in 2000. We strengthened our position as an independent full serviceprovider by establishing partnerships with OEMs (original equipment manufacturers)and gaining access to a new generation of products. And we are developing our totalcomponent support business for a growing number of customers.

EADS Sogerma Services also designs and manufactures cabin interiors at the Rochefortplant. This Business Unit strengthened its military business in the C-130 market, with itscapabilities in structural and avionics modernisation. As an example, the ‘Blue Flash’programme of modernisation and systems upgrade for 40 Mirage fighter aircraft.

With the delivery of a first converted Airbus A310-300 in February 2001 and the firstflight and certification of the first A300-600 in December 2001, EADS EFW confirmed itsability to convert any widebody Airbus to fully-functional freight specification and offersnow all A300/A310 models with an OEM solution as freighter conversion.

With our unique portfolio of Intelligence, Surveillance, Command and Control Systems,secure communication networks, missile systems and services we are very wellpositioned to address the new demands in the post 11th September security anddefence markets. Defence and Civil Systems (DCS) Division recorded revenues of €3.3 billion, an increase of 15% compared with 2000 (€2.9 billion). This growth waslargely due to new activities in the telecommunications sector. With an order intake of€3.1 billion, our current order book covers business activity for more than two years.

A corporate structure to match our customers’ requirementsWe have structured Defence and Civil Systems into four business areas in order toachieve optimal cost conditions for the anticipated build-up of mass-produced large-scaleprogrammes such as air-to-ground cruise missiles, surface-to-air anti-missile missiles andelectronic systems designed for Eurofighter. The four transnational business areas are:

• Missile systems – offering the world’s largest range of tactical missiles within the newly-created MBDA and EADS LFK.

• Systems and Defence Electronics (S&DE) – covering surveillance and reconnaissancesystems, command and control systems, radar technology, avionics and electronic warfare products.

• EADS Telecom – providing state of the art communication technology for defence and security applications.

• EADS Services – supplying test solutions, support and engineering activities for armed forces and government services, acting where required as an operator.

This customer-driven approach has already allowed us to achieve transnational synergiesand to contribute significantly to the harmonisation of European government purchases.

DEFENCE AND CIVIL SYSTEMS DIVISION

millions of euros 2001 2000** variation

REVENUES 3,345 2,909 +15%

EBIT* (79) (110) –

ORDER INTAKE 3,081 3,857 –20%

ORDER BOOK 9,094 9,722 –6%

* pre-goodwill amortisation and exceptionals.

** pro forma

• MBDA created – the world’ssecond largest missile systemscompany

• Strengthening of Systems andDefence Electronics activitiesthrough partnerships andcontracts, e.g. in the UAV field

• Creation of a dedicated “Services”unit, concentrating particularly onoutsourced government services

• Strengthening of secured telecombusiness through acquisition ofUK encryption leader (Cogent)

Defence and Civil Systems2001 has been a year of intensive integration, restructuring and strategic adaptation –

a year of severe market challenges but also of important successes which has provided

our businesses with a solid basis for growth and profitability in the years ahead.

44 EADS 2001 Defence and Civil Systems

Milas missile

We also anticipate that the new structure will enable us to broaden our markets byestablishing transatlantic programmes closely related to NATO’s Defence CapabilityInitiative, and to meet our profitability objectives in 2002 and beyond.

A position of strength in our key marketsThe integration and reorganisation of our activities has strengthened our competitiveposition. Not only are we now a truly global player in the field of missile systems; we are also the number three in Europe for systems and defence electronics. We have continued to develop as one of the leaders in secure telecommunications for military and public customers. Our Business Unit dedicated to services has beengeared up to meet the increasing demand of our national customers for outsourcedmilitary facilities.

EADS has recognised from the very beginning the importance of synergies across the various divisions to develop new business opportunities in defence and security,especially for more demanding customers looking for systems solutions. Initiatives havebeen launched to coordinate and integrate defence and security strategy globally, and across business boundaries. Since 11th September, these have been focusing onhomeland security issues (including ballistic missile defence), commercial air transportsecurity – in cooperation with Airbus – and mission aircraft for intelligence andsurveillance, all areas where DCS has a key role to play.

Missile SystemsAn important development was the merger in December of Matra BAe Dynamics,Aerospatiale Matra Missiles and the missile activities of Alenia Marconi Systems to form MBDA – the largest tactical missile systems company in Europe, and the second-largest in the world.

Through MBDA, we offer a highly competitive product portfolio including criticalsubsystems such as warheads, seekers, propulsion, proximity fuses and guidancesystems. MBDA starts life with annual revenues of nearly €2 billion, a forward orderbook of approximately €12 billion, customers in 70 countries and 10,000 employees at 12 main sites in Great Britain, France, Italy and the USA. MBDA also has strategicalliances with the German missile industry (including LFK, an EADS and MBDA common company) as well as in Spain, with the creation of a new missile companynamed Inmize (owned by MBDA, Indra, Izar and EADS CASA).

Thomas EndersExecutive Vice PresidentHead of Defence and Civil Systems DivisionEADS Executive Committee Member

EADS 2001 Defence and Civil Systems 45

€3.3bnrevenues

€9.1bnorder book

Rubis (digital radio network system)

Systems and Defence ElectronicsThis business was restructured and integrated in June 2001, to focus on four areas:Airborne Systems; Intelligence, Surveillance and Reconnaissance (ISR) Systems;Command, Control, Communication and Intelligence Systems; and Naval and GroundSystems. Additionally, the unit Business Development and International secures S&DE’scompetitive position in the global markets.

This business now has the critical mass to achieve profitable growth at international level.It has become the key European player in Unmanned Aerial Vehicles (UAVs) covering all types from light tactical to strategic long range, and is working on the EuroHawk in a joint project with Northrop Grumman.

Other contracts S&DE has been awarded include core sensor and combat managementsystems for the German K130 corvette, the Eurofighter Defensive Aids Subsystem(under a €700 million contract) and the Sostar X project to develop a synthetic-apertureradar for NATO’s airborne ground reconnaissance. S&DE’s position in the growth area of naval combat systems was confirmed by the contract as a system integrator forFinland’s Squadron 2000 programme.

Defence and Civil Systemscontinued

46 EADS 2001 Defence and Civil Systems

TelecommunicationsThis EADS Telecom Business Unit was created in March 2001, and covers all ouractivities in the areas of civil and defence telecommunications. The partnership betweenEADS and Nortel Networks in secured telecommunications has been restructured inEADS Defence and Security Networks (EDSN, owned 59% by EADS and 41% byNortel). Moreover, the EADS Telecom Business Unit has been enlarged with the transferof the UK Cogent Defence Systems, the enterprise business activities of Matra NortelCommunications, Dasa Com Networks, the US company Intecom, the Frenchcompanies Matranet and Sycomore.

In the Public Safety field we won major contracts in France, Spain and Mexico with the Tetrapol technology; in the defence market, we were contracted to supply over €120 million of communications equipment to the UK MOD (Cormoran contract). In France, the Rubis network for the Gendarmerie now covers all 97 administrativeregions. It is the largest professional digital radio network in the world, based on the Tetrapol technology retained for 59 networks in 28 countries.

Other successes included a contract with our US partner SAIC to equip the US Army’scombat training centre, and the choice of the Succession/6500 communication systemby the University of Rennes, France, as a result of which we shall be setting the largesttelephony network based on Internet Protocol (IP) ever created.

ServicesThe Services Business Unit was created in January 2001 to serve the growing globalmarket in functions like infrastructure support and operations, equipment support and training, which are being increasingly outsourced by governments. Our activities are centred on automatic testing, systems engineering, engineering solutions and military and other services.

In the domain of outsourced services, we are well positioned in logistics,telecommunication and training for the French, German and Spanish armies.

Outlook With a strong order book of €9.1 billion, the positive effects of a reorganised and moreefficient business and the transition from development to production of our majorprograms, the profitability of DCS will increase significantly from 2002 and thereafter.

Above: From information to decision

Top left: AS30 laser

Bottom left: Multimoderadar TRS-3D

Top right: Eurofighter withMeteor

EADS 2001 Defence and Civil Systems 47

SPACE DIVISION

millions of euros 2001 2000** variation

REVENUES 2,439 2,535 –4%

EBIT* (222) 67 –

ORDER INTAKE 1,327 3,024 –56%

ORDER BOOK 3,796 4,826 –21%

* pre-goodwill amortisation and exceptionals.

** pro forma

SpaceDespite a particularly difficult environment, EADS subsidiaries continued

to prove their technical expertise and competitiveness, for a wide range

of clients which includes national governments, space agencies in Europe

as well as commercial industry customers.

• Ariane 4 gains new reliability record

• Step 3 of the Ariane 5 programme approved by the ESA Ministerial Conference

• Skynet 4 successfullyaccomplished

• Early 2002: UK MoD decides onSkynet 5, Astrium to supplysatellites

It testifies to the high quality of the EADS Space Division that in a challengingenvironment we were able to maintain our revenue levels close to those of 2000. At €1.3 billion, the order intake for the year was, as anticipated, lower than the €3 billionfor 2000, which came from a particularly high number of orders in telecom satellite andbecause of the M51 ballistic missiles development programme. Nevertheless, at the endof the year, the order book covered future activity well into 2003.

EADS is today the largest space systems manufacturing company in Europe, and thethird largest in the world.

Through our subsidiaries Astrium (controlled 75% by EADS and 25% by BAE Systems),EADS Launch Vehicles (EADS LV) and our Business Unit EADS CASA Espacio, wedesign, develop and manufacture satellites, orbital infrastructures, launchers and ballisticmissiles.

We provide launch services through our shareholdings in Arianespace, Starsem andEurockot and services related to telecommunications and earth observation satellitesthrough our Business Unit EADS Space Services and through joint ventures. Finally, we are active in the field of optronics and space equipment including earth and starsensors (through EADS Sodern) and laser technologies (through EADS Cilas).

During the year, we took steps to strengthen the efficiency of our space activities inorder to improve profitability in a difficult market environment characterised by fiercecompetition and industry overcapacity.

We launched actions driven by:• an improved focus on customer satisfaction• cost reduction by strengthening integration• streamline of functions to improve management efficiency

48 EADS 2001 Space

Ariane 5

François AuqueExecutive Vice PresidentHead of Space DivisionEADS Executive Committee Member

A major element in the programme is the decision to implement in 2002 an improvementplan for satellite activities and to strengthen the cooperation between Astrium and EADSLV in launcher and orbital infrastructure activities. This redefined focus should allow theAstrium satellite business to meet its financial targets in the coming years, and willcontribute to the cost reduction targets of the Ariane 5 launcher which will allow usto remain competitive and profitable in the market place.

ArianeOf the 12 commercial launches that took place world-wide in 2001, Ariane wasresponsible for eight, six with Ariane 4 and two with Ariane 5.

In July 2001, during the second launch in the year of Ariane 5, an upper stage propulsionproblem was encountered. Subsequently, a detailed investigation was undertaken toidentify the source of the problem. The enquiry board has now reached its conclusionsand successful flight operations resumed successfully on 28th February 2002 with thelaunch of the Astrium-built earth observation giant, Envisat.

In November 2001, the European Space Agency (ESA) ministerial conference in Edinburghconfirmed its commitment to Step 3 of the Ariane 5 programme, which will allow Ariane tocarry up to 12 tons into geotransfer orbit. The Edinburgh conference also allocatedsubstantial budgets to the Ariane 5 Research and Technology Accompaniment (ARTA)programme, and to the financing of Kourou infrastructure. All these decisions are verypositive steps in reinforcing Ariane 5’s competitiveness. To this end, we have begun torestructure EADS launcher activities into a single company which will take responsibility forsystem prime contracting of Ariane development and production.

The International Space Station (ISS)EADS is playing a key role in the development and utilisation of the ISS, the world’s mostambitious space project. EADS LV is prime contractor for the development phase of theAutomated Transfer Vehicle, an unmanned transport system for regular delivery of fueland other supplies to the ISS, which will also provide reboost capability and a wastedisposal function. Astrium is prime system provider for the main European contribution,Columbus, a manned module for zero-gravity research.

Other launcher activitiesEurockot Launch Services, a joint venture owned by Astrium (51%) and the RussianKhrunichev space technology companies, won contracts to launch two micro-satellites,the Canadian MOST space telescope and the Czech Mimosa.

EADS 2001 Space 49

€3.8bnorder book

€2.4bnrevenues

Automated Transfer Vehicle (ATV) for the International Space Station (ISS)

Starsem, a joint venture owned by EADS, Arianespace and Russian partners,has worked to provide all necessary information to ESA, in view of a comingdecision to have the Soyuz launcher operated from Kourou.

DefenceThe development programme for the new generation submarine-based M51 missile moved forward successfully, and a test flight of the M4/M45intercontinental ballistic missile in April 2001 was successfully conducted.

Astrium and EADS LV have been selected by NATO as members of atransatlantic consortium to carry out a Theatre Missile Defence feasibility study.

Skynet 4 and 5The last Skynet 4 spacecraft – which carries UK military communications – was launched from Kourou in February 2001. In February 2002, following theUK MoD decision, Astrium will supply the satellite system for the nextgeneration programme Skynet 5, worth in total £2 billion, under contract toParadigm SPC (jointly owned by EADS and BAE Systems).

Spacecontinued

50 EADS 2001 Space

TelecommunicationsAstrium was chosen by Eutelsat to provide the W3A communications satellite which will be launched in mid-2003, and will also supply applications including businesscommunications, internet-based services and television transmission to a zone covering Europe and Africa from 7o East.

NavigationAt its ministerial conference in Edinburgh, the ESA gave its approval for the Galileoprogramme – the global satellite navigation system proposed jointly by the EuropeanCommission and ESA – with a value of more than €500 million. Final go-ahead was givenfrom the Commission’s transport ministers in March 2002. As a 50% shareholder inGalileo Industries S.A., Astrium is playing a crucial role in the design and development of Galileo, which is scheduled to be operational by 2008.

Earth observationOn 20 November 2001, for the first time ever, a data link between satellites wasestablished using a laser beam as signal carrier. The Astrium-primed Silex(Semiconductor-laser Inter-satellite Link Experiment) system consists of two terminals,one on board ESA’s Artemis communications satellite, the other on the CNES Earthobservation satellite Spot 4. Through the laser data link, high-definition video imagesfrom Spot 4 can be transmitted in real time via Artemis to the image processing centre.

Leadership in SciencePrestigious acknowledgement of Astrium’s expertise came in the form of the award tothe company by the ESA for the manufacture of the world’s largest silicon carbide spaceimagery instrument, the Herschel space telescope, which is due for launch in 2007.

Outlook2002 will be focused on the reorganisation of the Division, with the aim of reinforcingcustomer satisfaction and reducing costs through the streamlining of functions andimprovements to industrial organisation. These challenges will be eased by the tworecent successes in early 2002: Skynet 5 programme and Ariane 5 successfully launchedEnvisat, paving the way for the first cryogenic upper stage flight in the summer.

Above: Spot 5

Top left: Telecommunication satellite in integration

Bottom left: Helios II

Top right: Ariane 5 upper stage

EADS 2001 Space 51

EADS InternationalEADS International, the corporate entity in charge of international development of the

Group, is now fully operational as a single and multicultural team completely integrated

and entirely dedicated to winning business.

NH90 contract signing for the Nordiccountries

52 EADS 2001 EADS International

EADS International is a key partner in the campaigns that build the success of EADS.

An Integrated ApproachOperating in close cooperation with theBusiness Units in a task-force approach,EADS International provides them with awide range of high-level services in thefield of exports (including financialengineering, off-sets, industrial co-operation, package-deal expertise andfocused countries analysis) These servicesare key to successful businessapproaches. In addition, EADSInternational acts as a corporate catalyst,playing on the strengths and size of thewhole Group to support each BusinessUnit’s marketing approach.

With the support of its extensiveinternational network representativeoffices and its team of international marketexperts, EADS International has managedto create a constructive team spirit withBUs, whatever their size. It is now arecognised partner whose task-forceapproach has been proven efficientthrough achieved results.

2001’s Export SuccessesEADS International was instrumental inthe campaigns that helped to create thesuccess of EADS in 2001. For example,Eurocopter performed extremely well thisyear with EADS International supportingits work in the Nordic Countries for theNSHP/NH-90 campaign as well as in thefirst export of the Tiger with the AustralianGovernment official decision to acquire22 helicopters.

International teams also participated inGroup achievements including Airbus inAustralia, Qatar and Taiwan and theofficial Spanish Hispasat decision in favour of Astrium’s AmazonasTelecommunications satellite.

Its actions were also decisive in othercampaigns such as EADS CASA in theUAE, EADS Sogerma Services inVenezuela and Taiwan as well as Systemsand Defence Electronics in Estonia,Singapore and Mexico.

New ChallengesEADS strategy is today focused onbalancing its civilian and governmentalactivities, and EADS International is well-equipped to support programmes that arebecoming more important than ever, likeUAVs, C3I and C4ISR systems, A330-MRTT and the A400M as well as GlobalAir Defence with VL Mica and the Asterfamily.

At the same time, the team will continueto support the Group’s civilian activitiesincluding Astrium’s Telecommunicationssatellites, ATR aircraft or Airbus in strategicexport campaigns.

EADS International is thus in the front lineto cope with these new challenges whereinternational markets are crucial to success.

Airbus A380 in the colours of EmiratesAirlines, which ordered 22 aircraft and ten options

Jean-Paul GutExecutive Vice PresidentHead of EADS InternationalEADS Executive Committee Member

EADS CASA signed a contract with Polandfor the sale of eight C-295

Australia signed the contract of sale for 22 Tiger

EADS 2001 EADS International 53

External offices

Australia Brazil Canada ChileChina Croatia CzechRepublicEgypt Finland Greece IndiaIndonesia Italy Japan KoreaKuwait Malaysia Mexico PolandPortugal Russia SaudiArabiaSingapore Slovenia SouthAfricaSpain Taiwan Thailand TurkeyUnitedArabEmirates UnitedKingdom

Headquarters Organisation

54 EADS 2001 Headquarters Organisation

Corporate Functions

The EADS Headquarters and its functions are located in Amsterdam and its Head Offices

in Madrid, Munich and Paris.

CHIEF EXECUTIVE OFFICERPhilippe Camus

CHIEF EXECUTIVE OFFICERRainer Hertrich

GENERAL SECRETARYPierre-Henri Ricaud

COMMUNICATIONSChristian Poppe

HUMAN RESOURCES Jussi Itävuori

PURCHASINGHans-Erich Mundt

LEGAL AFFAIRSEric Thomas

POLITICAL AFFAIRSWolf-Peter Denker

Carlos Grandal

Denis Verret

STRATEGIC COORDINATIONJean-Louis Gergorin

EADS INTERNATIONALJean-Paul Gut

CHIEF FINANCIAL OFFICERAxel Arendt

STRATEGY AND PLANNINGReinhold Lutz

MERGERS AND ACQUISITIONSMarwan Lahoud

INDUSTRIAL, RESEARCH AND TECHNOLOGY, QUALITY

Jean-Marc Thomas

CONTROLLINGHans-Peter Ring

FINANCE TREASURYGérard Adsuar

INVESTOR RELATIONSMarc Paganini

ACCOUNTING/TAXJoachim Feyel

INFORMATION MANAGEMENTAndreas Groth

Members of the Executive Committee

overall Group development, coordinatingthe businesses and creating the synergiesas well as providing support for LegalAffairs, Human Resources and otheressential central functions. With the newdefinition of its role, a restructuring

After the merger in 2000, EADSundertook an intensive study on thedefinition of the role of its Headquarters asa “Strategic Architect”. The Headquartersis in charge of Finance, Merger andAcquisitions, Strategy and Planning for the

of the Headquarters has been initiated,resulting in headcount reduction from morethan 1,000 people in 2000 to a target ofaround 540 in 2003 through earlyretirement plans, outsourcing or transfers to EADS Business Units.

international committees for sub-groupshave been set up, offering a commonplatform for discussion of the challengeswe face and of the company’s future plans– both of which are usually international in nature.

Human Resources

EADS 2001 Human Resources 55

that rewards personal performance and is also linked to company earnings andincreased corporate value.

International career development opportunitiesA Group-wide system for identifying and promoting future managers has been introduced, and an internal jobmarket enables employees to apply forposts on offer – either in their owncountry or abroad. Development of EADS executives is promoted through the Corporate Business Academy, whichfocuses on both the provision of trainingand on the promotion of a commoncorporate culture.

Flexibility at work – the benefits11th September represented anunprecedented challenge. Our existingemphasis on capacity flexibility is nowbearing fruit, and has so far enabled us toavoid compulsory redundancies or highrestructuring costs – thus retainingvaluable expertise within the company for the anticipated recovery.

European Works CouncilThe European Works Council had to passits first tests during 2001. In addition to thebodies representing the entire workforce,

Jussi ItävuoriGroup Vice PresidentHuman ResourcesOur employees – a key factor

for future successSurveys indicate that the new companyhas already inherited the reputation of its precursor companies as being amongthe most attractive employers in its variouscountries. EADS is regarded as one of the top employers in Europe, among both engineers and young managers.

Entrepreneurial awarenessIn order to foster entrepreneurialawareness, employees have been offereda second opportunity to participate in an employee share ownership plan. The response has been extremely positiveand the shares were over-subscribed.

Throughout EADS there is now aremuneration structure for top managers

European Works Council of EADSAn intercultural working atmosphere ispart of EADS culture

Working together: Engine maintenance Test Cell

France 40.4%

Germany 37.3%

UK 11.4%

Spain 7.7%

Americas 2.1%

Rest of the World 1.1%

Employees by country

EADS Group 102,967

Airbus 45,543

Military Transport Aircraft 3,573

Aeronautics 24,230

Defence and Civil Systems 17,650

Space 10,414

Headquarters and research centres 1,557

Employees year-end 2001

The EnvironmentWe accept our responsibilities towards theenvironment and have implemented aCorporate Policy for Health, Safety andthe Environment to ensure that we complywith the laws and regulations of eachcountry in which we operate, as well asinvesting in research and developmentdesigned to improve our ability to meet or exceed such regulatory standards. We actively support the participation ofemployees in pursuing new products and technologies that promote resourceconservation, facilitate recycling andpreserve the natural environment as muchas possible.

Customers’ rights and internationaltradingTo defend and to enhance the confidenceof its customers in the Group is one of ourprime objectives. We can only achieve thisthrough the strictest respect for thecustomers’ rights.

As suppliers of goods and services togovernments and governmental agencies,we comply with the rules and proceduresfor acquisitions in force in each customercountry. National or international exportand customs laws may regulate where,when and how we can sell products,services and technology, or exchangeinformation. We require each employeeand all Business Units to comply fully withsuch laws.

Respect for employeesWe guarantee to all employees respect fortheir dignity, their privacy, their safety atwork and their rights. This applies to allemployees regardless of age, disability,national origin, sex, religion or opinion;and we expect the same high standardsfrom our suppliers and business partners.

Shareholders’ rights andexpectationsOur relationships with shareholders arebased on the protection of their interestsand on their equal access to relevant,accurate and timely information. As a Dutch listed company in France,Spain and Germany, we fully complywith the laws and regulations applicable in each country.

Conflicts of interestWe have no “privileged or special”relationships with business partners orsuppliers, which would not be justified onobjective economic or technical grounds.Relationships between employees andsuch parties must be governed bytransparency, in particular with respect topurchase contacts and sales relationships.The acceptance or granting of gifts orother advantages is only authorised understrict conditions of mandatory disclosureand the approval of management.

Corporate and Social ResponsibilityEADS is committed to maintaining and defending irreproachable ethical standards in the

Group’s business relationships both inside and outside the company. These standards

are laid down in our Ethics Code, as well as in the Insider Trading Rules, which provide

general guidelines for behaviour towards internal and external parties alike.

56 EADS 2001 Corporate and Social Responsibility

EADS is an attractive industrial employer: Recruiting event during Le Bourget Airshow

Right: Music and the arts are at homeat EADS

Far right: Open doors at EADS MilitaryAircraft in Manching near Munich.50,000 visitors joined the “Family-day”

Dealing in EADS sharesWe encourage employees to hold EADSshares. Employees may freely carry outtransactions in Group shares where suchoperations comply with the relevantapplicable law and with the provisions laiddown in the EADS Insider Trading Rules.

Some EADS employees have access byvirtue of their duties to privilegedinformation. In order to comply with theprohibitions provided by the national lawor national stock exchange marketauthorities, such employees are legallyforbidden to provide third parties withsuch information, or to conduct financialoperations directly or indirectly exceptduring specific periods, and subject to theapproval of the Chief Financial Officeracting as Compliance Officer. Anybeneficiary of privileged information islegally subject to the duty of discretion;any breach of such legal duty being acriminal offence.

Behaving as good corporate citizensAs one of the largest Europeancompanies, EADS is conscious of itsduties to the cultural, educational andsocial environment in each country. We encourage active and responsibleparticipation to community events andeducational institutions in order topromote cooperation and developmentprovided that such participation does notcontravene EADS policies or interfere with employees’ duties. The EADS response to big catastrophes has includedthe donation of significant amounts tosupport victims of the 11th Septemberterrorist attacks and their families,and to the victims of the disaster inToulouse, which occurred on the 21st September.

Reliable Accountable Responsible Committed

EADS 2001 Corporate and Social Responsibility 57

Travelling on hydrofoils, the Hydroptère isa revolutionary seacraft design sponsoredby EADS

Astrium engineers working on the newEuropean weather satellite Metop

The Company is governed by Dutch law and its Articles of Association. The Company

has a single-tier structure – the Board of Directors – combining both executive and

non-executive members. The Board is the highest decision-making body besides

the shareholders’ meeting.

Corporate Governance

The Board of Directors is responsible forthe affairs of the Company. The role of theBoard of Directors is to ensure that theCompany is operated to maximiseshareholder value in accordance to thelaw and the established rules of CorporateGovernance, whilst maintaining goodrelationships with the Company’semployees and customers.

The Board of Directors comprises elevenmembers, appointed and removed by the shareholders’ meeting. The Board of Directors has an equal number ofDirectors proposed by DaimlerChryslerAG and by SOGEADE1 respectively and one Director proposed by SEPI2, plus two independent Directors who have noconnection with the DaimlerChrysler,SOGEPA or Lagardère Groups or theFrench State. One is nominated byDaimlerChrysler and one is nominated by SOGEADE.

The Board of Directors has appointed fromamong its members the two ChiefExecutive Officers (CEOs) responsible forthe day-to-day management of the

Company and has designated its twoChairmen to ensure the smoothfunctioning of the Board of Directors andto support the Chief Executive Officers ofthe Company with regard to top-levelstrategic discussions with outside partners.

Beyond applicable Dutch legal constraints,the Board of Directors has also adopted itsown internal rules to provide modernCorporate Governance principles. Inparticular the Board of Directors hasformed two standing committees from itsmembers:

• The Audit Committee, which makesrecommendations to the Board ofDirectors on the appointment ofauditors, the approval of the annualfinancial statements and the interimaccounts, and monitors the adequacy of EADS’s internal controls, accountingpolicies and financial reporting. TheAudit Committee meets at least twice a year. It is chaired by Manfred Bischoffand Jean-Luc Lagardère and alsoincludes Eckhard Cordes and Louis Gallois.

• The Personnel Committee, whichmakes recommendations to the Boardof Directors regarding appointments tothe Executive Committee, remunerationstrategies and long-term remunerationplans and decides the service contractsand other contractual matters in relationto the Board of Directors and ExecutiveCommittee members. The PersonnelCommittee meets at least twice a year. It is chaired by Manfred Bischoff andJean-Luc Lagardère and also includesPhilippe Camus, Eckhard Cordes, Louis Gallois and Rainer Hertrich.

Topics discussed during the Boardmeetings relate mainly to EADS strategy,major business issues, major investmentprojects, and financial results andforecasts.

58 EADS 2001 Corporate Governance

■ 30.2% DaimlerChrysler

■ 30.2% SOGEADE1

■ 5.5% SEPI2

■ 34.1% Public, including EADS employees and

about 3% held by DaimlerChrysler and

the French State

Shareholder structure as of 31 December 2001

30.2%

34.1%

5.5%

30.2%

1 Lagardère SCA together with French financial institutions and SOGEPA (French state holding company).2 Spanish state holding company.

Manfred Bischoff

Member of the ManagementBoard of DaimlerChrysler AGChairman of EADS Board of Directors

Philippe Camus

EADS Chief Executive Officer

Axel Arendt

EADS Chief Financial Officer

Pedro Ferreras

LawyerSEPI Representative

Jean-René Fourtou

Vice President of Aventis S.A.

Michael Rogowski

Chairman of the SupervisoryBoard of J.M.Voith AGPresident of the Federation ofGerman Industry

Jean-Luc Lagardère

General and Managing Partner ofLagardère SCAChairman of EADS Board of Directors

Rainer Hertrich

EADS Chief Executive Officer

Eckhard Cordes

Member of the ManagementBoard of DaimlerChrysler AG

Noël Forgeard

Airbus President and ChiefExecutive Officer

Louis Gallois

President of SNCF

EADS 2001 Corporate Governance 59

Members of the Board of Directors

INTRODUCTION

The following discussion is based upon the audited consolidated financial statements of EADS for 2001 (the “2001 Financial Statements”)and the unaudited pro-forma consolidated financial statements of EADS for 2000 (the “2000 Pro-Forma Financial Statements”).

The 2001 Financial Statements were prepared in accordance with the accounting standards issued by the International AccountingStandards Board (“IASB”) and the interpretations issued by the Standing Interpretations Committee of the IASB. The 2000 Pro-FormaFinancial Statements were prepared on the basis of the following:

• the consolidated financial statements of EADS for 2000, prepared under IAS;

• the pro-forma effects of the 2000 transactions combining Aerospatiale Matra, Dasa and Casa (hereinafter, the “EADS Merger”); and

• the pro-forma financial statements of Dasa and the pro-forma financial statements of Casa for the period in 2000 prior to the creation ofEADS on 10th July as reconciled to IAS as adopted by EADS and net of the cash amounts distributed by Dasa and Casa to theirrespective shareholders prior to the creation of EADS.

The unaudited pro-forma consolidated financial information of EADS for 2000 included herein is provided for illustrative purposes onlyand does not purport to represent what the financial position, results of operations or cash flows of EADS would actually have been if theEADS Merger had occurred as of the dates indicated or to project the consolidated financial position, results of operations, or cash flowsfor any future date or period.

The 2000 Pro-Forma Financial Statements refer to the scope of consolidation that resulted from the EADS Merger in 2000; as such, theydo not reflect changes in consolidated entities or accounting methods that occurred in 2001. Consequently, the scope of consolidationreferred to in the 2000 Pro-Forma Financial Statements differs significantly from that referred to in the 2001 Financial Statements.

ACCOUNTING CONSIDERATIONS

CHANGES IN CONSOLIDATED ENTITIES AND MINORITY INTERESTSFormation of Airbus SAS: Airbus SAS, the newly formed company integrating all design, manufacturing and marketing activities ofAirbus, was established in July 2001 following the acquisition by EADS of Airbus UK and of the 20% stake in Airbus GIE held by BAESystems (the “Airbus Combination”). As consideration for this transaction and its subscription to a €754 million capital increase, BAESystems received 20% of the share capital of Airbus SAS through a capital increase while EADS’ interest was diluted to 80%.

EADS has fully consolidated Airbus since 1st January 2001, in light of the effective control it has exercised, by agreement with BAE Systems, over the Airbus assets and operations since that date.

Formation of MBDA: On 18th December 2001, EADS, BAE Systems and Finmeccanica formed MBDA, which combines thebusinesses of MBD and of AMM, and the missile systems activities of AMS. EADS and BAE Systems each hold a 37.5% stake in MBDA, with Finmeccanica holding the remaining 25%. Pursuant to the shareholder agreements relating to the MBDA group, EADS and BAE Systems together exercise certain controlling rights over MBDA through MBDA Holdings, including the right ofMBDA Holdings to appoint MBDA’s CEO, COO-Operations and CFO.

In 2001, the consolidated statement of income reflects a 50% consolidation of MBD and a full consolidation of AMM through to theformation of MBDA on 18th December. From 18th December, as shown in the 2001 consolidated balance sheet, EADS has beenproportionally consolidating 50% of MBDA within the Defence and Civil Systems Division, in line with its ability to influenceoperations, with Finmeccanica’s holding reflected as a 12.5% minority interest.

EDSN: Throughout 2001, EADS and Nortel Networks completed the reorganisation of their military telecommunication operationswithin EDSN. Specifically (i) EADS and Nortel Networks contributed to EDSN the IP-capable switching activities of their joint ventureMNC on 1st May; (ii) EDSN purchased a 19.9% share of MNCD, which operates the distribution channel related to the IP-capableswitching activities, on 30th September; (iii) EADS contributed VEKN, a tactical communication networks business, to EDSN on 30th November; and (iv) Nortel Networks sold Cogent Defence Systems to EDSN on 1st December. As a result, Nortel Networks’minority interest decreased from 45% to 40.9%, while EADS fully consolidates EDSN within the Defence and Civil Systems Division.

Analysis of the Financial Situation

60 EADS 2001 Analysis of the Financial Situation

2001 Audited Consolidated Financial Statements and 2000 Unaudited Pro-Forma Consolidated Financial Statements

EADS 2001 Analysis of the Financial Situation 61

MNC and NNG: Mirroring the repositioning of military telecommunication activities within EDSN, and the disengagement of EADS’significant influence in MNC and NNG in response to the decreasing strategic importance of the civil telecommunications businessesto EADS, EADS has been accounting for MNC and NNG (of which it still holds 45% and 42%, respectively) as non-consolidatedinvestments since 1st October 2001. The two companies, whose share capital was held jointly with Nortel Networks, wereconsolidated under the equity method prior to such date.

Acquisition of Tesat Spacecom: In 2001, Astrium, which is 75% proportionately consolidated by EADS, acquired Tesat SpacecomGmbH & Co. KG, the satellite communications-payload business of Bosch. Astrium now fully consolidates Tesat Spacecom.

Dornier GmbH: Following the exercise by Dornier family members of a put option on Dornier GmbH shares, DADC, a fullyconsolidated subsidiary of EADS, increased its interest in Dornier GmbH from 58.4% to 75.9%. While EADS has fully consolidatedDornier GmbH in both of the periods under discussion, the minority interest decreased from 41.6% to 24.1%.

DILUTION GAINSThe 2001 transactions leading to the formation of Airbus SAS and MBDA resulted in a dilution of EADS’ economic ownership inAirbus, MBD and AMM. These transactions required an assessment of the contributed businesses, whose market value, estimated inthe course of negotiations, exceeded the carrying value of their equity for EADS. Consequently, EADS recognised dilution gains of €2,537 million for a 20% stake in Airbus, and of €257 million, net of transaction related charges, for 12.5% of MBD and 62.5% of AMM. These dilution gains are reported in other income and are deemed exceptionals by EADS. See “Results of Operations – Use of EBIT and Net Income Pre-Goodwill Amortisation and Exceptionals”.

FAIR VALUE ADJUSTMENTSIn the process of the Airbus Combination, the acquisition of Airbus UK was recorded using the purchase method of accounting.Accordingly, the book value of certain items, mostly property, plant and equipment and inventories, was adjusted by an aggregate€319 million, net of taxes, to reflect their respective fair market values (the “Fair Value Adjustments”) and a deferred tax liability of€137 was recorded. Depending on the nature of the asset, depreciation of Fair Value Adjustments is either recorded when theunderlying assets are consumed or is scheduled over their useful life, and gives right to a related reduction of deferred tax liabilities.

The excess of the purchase price of Airbus UK (including the 20% share in Airbus GIE) over the fair value of its net assets was recordedas goodwill and amounted to €4,024 million. Amortisation of goodwill is scheduled over 20 years, and is mostly not tax deductible.

IMPAIRMENT OF ASSETSWhen, in the view of Management, a triggering event such as a material market event or a significant change in forecasts orassumptions occurs, EADS performs an impairment test on the net assets of the business or businesses likely to be affected.Impairment tests are typically performed using the discounted cash flow method.

In 2001, EADS conducted impairment tests on the goodwill of businesses in the Airbus Division, the Space Division and the Defence and Civil Systems Division. In the Defence and Civil Systems Division, recognition of a restrictive government defencespending policy led EADS to impair the goodwill of MS&I, a company within the Defence Electronics business (€240 million) and LFK(€170 million). Reduced market prospects for CAD/CAM software services led EADS to impair the goodwill of Matra Datavision by€170 million. In the Space Division, acknowledgement of the contraction in the commercial telecommunications market, coupled withlong-term overcapacity in the satellite business requiring substantial cost reductions and streamlining, resulted in a €210 millionimpairment to the Astrium goodwill. An impairment test on Airbus, triggered by the events of 11th September and subsequentdevelopments, confirmed the value of the goodwill of Airbus.

RESEARCH AND DEVELOPMENT EXPENSESEADS recognises internally-financed research and development costs as an expense in the year incurred. When research anddevelopment expenses are financed in whole or in part by the customer, the externally-financed portion is recognised as revenues.While EADS’ internally-financed research and development costs are reflected in the income statement under research anddevelopment, the costs of externally-financed research and development are reflected in the income statement under cost of sales.

The accounting treatment for research and development costs adopted by EADS does not conform to IAS, which the Companyotherwise follows in the preparation of its consolidated financial statements. IAS requires that development costs be capitalised as anintangible asset in the period in which incurred if certain criteria for asset recognition are met. This departure from IAS makes EADSmore directly comparable with US companies in the same sector, and reflects a more conservative approach towards the accountingtreatment of research and development costs than that required by IAS.

Analysis of the Financial Situationcontinued

62 EADS 2001 Analysis of the Financial Situation

SALES FINANCING POLICY

EADS favours cash sales, and encourages independent financing by customers, in order to avoid retaining credit or asset risk inrelation to delivered products.

However, in order to support product sales, primarily at Airbus and ATR, EADS may agree to participate in the financing of customers,on a case-by-case basis, directly or through guarantees provided to third parties. A dedicated team closely monitors total EADScustomer exposure and its evolution in terms of quality, volume and cash intensity. EADS aims to sell down exposure to outsideparties whenever feasible.

In determining the amount and terms of the financing transaction, Airbus and ATR take into account the airline’s credit rating as wellas risk factors specific to the intended operating environment of the aircraft and its expected future value. Market yields and currentbanking practices also serve to benchmark the financing terms offered to customers, including price.

Sales financing transactions are generally collateralised by the underlying aircraft. Additionally, Airbus and ATR benefit from protectivecovenants and from security packages tailored according to the perceived risk and the legal environment.

RESTRUCTURING AND OTHER COSTS

Total restructuring charges of €221 million were recorded in 2001. This included new provisions and same year charges primarilyrelated to (i) headcount reductions in the UK and early retirements in France at Airbus as part of adaptability measures following 11th September (€96 million); (ii) headcount reductions and early retirements at CELERG, LFK, AMM and EADS Telecom and a siteclosure at the Services business unit in the Defence and Civil Systems Division (€34 million); and (iii) headcount reductions at EADSLaunch Vehicles in the Space Division (€91 million).

The balance of provisions for restructuring as at 31st December 2001 was €286 million.

RESULTS OF OPERATIONS

Year-to-year comparisons of results of operations are based upon the 2001 audited consolidated financial statements and the 2000unaudited pro-forma consolidated financial statements. See “Introduction”.

The following table sets forth the consolidated income statement of EADS for the twelve-month periods indicated.

Statements of Income for the Years Ended 31st December 2001 and 2000

Year ended31st December

2001 2000in €m pro-forma

Revenues 30,798 24,208Cost of sales (25,235) (20,072)Gross margin 5,563 4,136Selling, administrative and other expenses (2,561) (2,510)Research and development expenses (2,046) (1,339)Other income 3,024 342Goodwill amortisation and impairment losses (1,466) (429)Income before financial income and income taxes 2,514 200Financial income (expense), net (513) (1,315)Income (loss) before income taxes 2,001 (1,115)Income taxes (646) 220Minority interests 17 (14)Net income (loss) 1,372 (909)

EADS 2001 Analysis of the Financial Situation 63

USE OF EBIT AND NET INCOME PRE-GOODWILL AMORTISATION AND EXCEPTIONALSEADS uses EBIT pre-goodwill amortisation and exceptionals and net income pre-goodwill amortisation and exceptionals as keyindicators of its economic performance. The term “exceptionals” refers to income or expenses of a non-recurring nature, such asamortisation expenses of fair value adjustments relating to the EADS Merger, the Airbus Combination and the formation of MBDA,and impairment losses. In addition, “exceptionals” associated with net income are net of corresponding tax effects, and include an exceptional allowance for deferred tax assets.

Set forth below is a table reconciling EADS’ income before financial income and income taxes with EADS’ EBIT pre-goodwillamortisation and exceptionals.

Year ended31st December

2001 2000in €m pro-forma

Income before financial income and income taxes 2,514 200Dilution gain Airbus, MBDA (2,794) –Goodwill amortisation and impairment losses 1,466 429Exceptional depreciation (fixed assets) 260 176Exceptional depreciation (financial assets) 315 –Exceptional depreciation (inventories) 275 483Income from investments (342) 111EBIT pre-goodwill amortisation and exceptionals 1,694 1,399

The following table sets forth the net income and earnings per share pre-goodwill amortisation and exceptionals of EADS for thetwelve-month periods indicated.

2001 2000pro-forma

Net income attributable to shareholders pre-goodwill amortisation and exceptionals €936m €(45)mBasic earnings per share pre-goodwill amortisation and exceptionals €1.16 €(0.06)

Prior to the change in consolidation method from equity to cost of MNC and NNG, the value of these investments in the accounts ofEADS was reflected in aggregate goodwill of €516 million. Impairment tests conducted for these businesses in light of the downturnin the telecommunications sector led to an exceptional aggregate depreciation of €315 million for MNC and for NNG, which is lessthan the goodwill recorded for such businesses on the 2001 opening consolidated balance sheet. Consequently, for the purpose of computing exceptionals, such depreciation is being treated as a goodwill impairment and the aggregate loss of €315 million relatedto MNC and NNG is being excluded from income from investments. Goodwill amortisation as recorded on the statement of incomedoes not include this €315 million amount.

CONSOLIDATED REVENUES AND EBIT BY DIVISION – SEGMENT INFORMATION

Set forth below is a breakdown of EADS’ consolidated revenues by Division for the past two years, as well as consolidated capitalexpenditures (which include leased assets), consolidated research and development expenditures and consolidated EBIT pre-goodwillamortisation and exceptionals.

Year ended 31st December 2001 Year ended 31st December 2000 (pro-forma)Capital EBIT Capital EBIT

in €m Revenues Expenditures R&D PGE (1) Revenues Expenditures R&D PGE (1)

Airbus 20,549 1,433 1,630 1,655 14,856 657 920 1,412Military Transport Aircraft 547 63 53 1 316 55 59 (63)Aeronautics 5,065 281 132 308 4,704 307 128 296Space 2,439 99 60 (222) 2,535 145 61 67Defence and Civil Systems 3,345 159 173 (79) 2,909 117 161 (110)Subtotal 31,945 2,035 2,048 1,663 25,320 1,281 1,329 1,602Eliminations and others(2) (1,147) 161 (2) 31 (1,112) 70 10 (203)EADS 30,798 2,196 2,046 1,694 24,208 1,351 1,339 1,399(1) “EBIT PGE” refers to EBIT pre-goodwill amortisation and exceptionals. Eliminations and others includes income from the Dassault Aviation investment.

(2) Includes, in particular, adjustments and eliminations for intercompany transactions and revenues from leases of office space.

AIRBUSConsolidated revenues of the Airbus Division increased by 38.3% from €14,856 million in 2000 to €20,549 million in 2001, mainly dueto the effects of the Airbus Combination, but also as a consequence of increases in aircraft deliveries from 311 aircraft in 2000 to 325aircraft in 2001. As in 2000, most of the increase in deliveries occurred in the relatively lower-priced, single-aisle A319/A320/A321aircraft family. Airbus delivered 257 units of this type of aircraft in 2001, compared with 241 in 2000. Revenues from 2000 to 2001were only slightly affected by the strengthening of the dollar against the euro.

Consolidated capital expenditures increased by 118% from €657 million in 2000 to €1,433 million in 2001, primarily due to the Airbus Combination and investments for the A380 program.

Consolidated R&D expenses increased by 77.2 % from €920 million in 2000 to €1,630 million in 2001, principally as a consequence ofthe ramp-up of the A380 development program and increased expenditures in connection with the continued development of theA340-500 and A340-600 programs.

Consolidated EBIT pre-goodwill amortisation and exceptionals increased by 17.2% from €1,412 million in 2000 to €1,655 million in2001. This increase was mainly a consequence of the Airbus Combination, as well as an increase in aircraft deliveries, productivityimprovements and, to a lesser extent, the positive impact of the dollar-euro exchange rate. Increased R&D expenses, additionalprovisions related to restructuring and aircraft sales financing exposure partially offset the increase.

MILITARY TRANSPORT AIRCRAFTConsolidated revenues in the MTA Division increased by 73.1% from €316 million in 2000 to €547 million in 2001, due principally to increased sales under the C-295 contract with the Spanish Airforce and the CN-235 contract with Turkey.

Consolidated capital expenditures increased by 14.5% from €55 million in 2000 to €63 million in 2001.

Consolidated R&D expenses decreased by approximately 10.2 % from €59 million in 2000 to €53 million in 2001.

Consolidated EBIT pre-goodwill amortisation and exceptionals improved from a loss of €63 million in 2000 to a gain of €1 million in 2001, principally as a result of a more favourable product mix and increased deliveries.

64 EADS 2001 Analysis of the Financial Situation

Analysis of the Financial Situationcontinued

EADS 2001 Analysis of the Financial Situation 65

AERONAUTICSConsolidated revenues in the Aeronautics Division increased by 7.7 % from €4,704 million in 2000 to €5,065 million in 2001, primarilydue to an increase in revenues from Eurocopter and from other military aircraft programs, including the Eurofighter series productionphase and, to a lesser extent, the maintenance business.

Consolidated capital expenditures decreased by 8.5% from €307 million in 2000 to €281 million in 2001.

Consolidated R&D expenses increased by 3.1% from €128 million in 2000 to €132 million in 2001.

Consolidated EBIT pre-goodwill amortisation and exceptionals increased by 4.1% from €296 million in 2000 to €308 million in 2001,mainly due to increased deliveries of aircraft.

DEFENCE AND CIVIL SYSTEMSConsolidated revenues in the Defence and Civil Systems Division increased by 15.0% from €2,909 million in 2000 to €3,345 million in 2001. The increase related primarily to the effects of an enlarged scope of consolidation in the telecommunications business.

Consolidated capital expenditures increased by 35.9% from €117 million in 2000 to €159 million in 2001, primarily due to theacquisition of facilities by MBD.

Consolidated R&D expenses increased by 7.5% from €161 million in 2000 to €173 million in 2001.

Consolidated EBIT pre-goodwill amortisation and exceptionals improved from a loss of €110 million in 2000 to a loss of €79 million in2001, mainly due to improved sales and margins, as well as the positive impact of previous restructuring on the Defence Electronicsbusiness. The improvement was offset in part by the impact from January through September 2001 of negative performance of thecivil telecommunications joint ventures with Nortel.

SPACEConsolidated revenues in the Space Division decreased by 3.8% from €2,535 million in 2000 to €2,439 million in 2001, primarily due to fewer deliveries of Ariane 5 and Ariane 4 launchers during 2001.

Consolidated capital expenditures decreased by 31.7% from €145 million in 2000 to €99 million in 2001.

Consolidated R&D expenses remained stable, with €61 million of expenses in 2000 and €60 million in 2001.

Consolidated EBIT pre-goodwill amortisation and exceptionals decreased from a gain of €67 million in 2000 to a loss of €222 millionin 2001. The decrease is primarily attributable to write-downs of investments in Nahuelsat, Starsem, Arianespace and Spacehabfollowing a critical reassessment of the value of certain investments. Reduced sales, continued restructuring costs and new provisionsfor restructuring associated with EADS Launch Vehicles contributed to the decrease.

RESULTS OF OPERATIONS OF EADS: 2001 COMPARED WITH 2000 (PRO-FORMA)

CONSOLIDATED REVENUESTotal consolidated revenues of EADS increased by 27.2% from €24,208 million in 2000 to €30,798 million in 2001. Of the 27%increase, approximately 17% was attributable to the effects of the Airbus Combination. The remainder of the increase was related toincreased deliveries of commercial aircraft by Airbus, from 311 aircraft delivered in 2000 to 325 aircraft in 2001. All other Divisions ofEADS, excluding the Space Division, contributed to the increase of consolidated revenues in 2001.

An additional factor that had a significant positive effect on EADS’ revenue stream in 2001, given the importance of EADS’ dollar-denominated sales, was the strengthening of the dollar against the euro over the course of 2001.

CONSOLIDATED COST OF SALESConsolidated cost of sales for EADS increased 25.7% from €20,072 million in 2000 to €25,235 million in 2001. This increase wasmainly attributable to the effects of the Airbus Combination. Costs associated with the increased deliveries of Airbus aircraft as well ascharges associated with restructuring in the Defence and Civil Systems Division and the Space Division were also significant factorscontributing to the increased consolidated cost of sales.

CONSOLIDATED SELLING, ADMINISTRATIVE AND OTHER EXPENSESConsolidated selling, administrative and other expenses for EADS increased 2.0% from €2,510 million in 2000 to €2,561 million in2001. The increase was mainly attributable to the effects of the Airbus Combination, including higher administrative expenses relatedto the Airbus Combination. This increase was offset by lower expenses than in 2000, which had been impacted by a disposal loss andhigher provisioning.

CONSOLIDATED RESEARCH AND DEVELOPMENT EXPENSESEADS’ consolidated research and development expenses increased 52.8% from €1,339 million in 2000 to €2,046 million in 2001,primarily due to the full consolidation of Airbus and the ramping up of the A380 program. Expenses associated with the A340-600certification remained high, while non-Airbus related research and development expenses were relatively unchanged from 2000.

CONSOLIDATED OTHER INCOMEConsolidated other income represents principally gains on sales of investments and fixed assets and rental income. EADS had otherincome in 2000 of €342 million, compared to €3,024 million in 2001. This increase is mainly due to the non-recurring effect of thedilution gains relating to the Airbus Combination (€2,537 million) and the MBDA transaction (€257 million, net of MBD goodwillamortisation). See “Accounting Considerations – Changes in Consolidated Entities” and “Accounting Considerations – Dilution Gains”

AMORTISATION OF GOODWILL AND IMPAIRMENT LOSSESConsolidated amortisation of goodwill and impairment losses increased from €429 million in 2000 to €1,466 million in 2001, primarily as a result of (i) goodwill impairment losses in the Defence and Civil Systems Division (€580 million) and the Space Division(€210 million) and (ii) Airbus UK annual goodwill amortisation (€200 million). See “Accounting Considerations – Impairment of Assets”.

CONSOLIDATED FINANCIAL INCOME (EXPENSE), NETConsolidated financial income (expense), net includes principally investment income (including profits and losses of companiesaccounted for under the equity method and the write downs of non-consolidated investments), net interest expense and exchange rategains and losses. Financial income (expense) of EADS improved from a net loss of €1,315 million in 2000 to a net loss of €513 million in 2001. Much of this variation was associated with negative investment income (€(342) million, including the €315 million impairment of MNC and NNG) and, to a lesser extent, EADS’ remaining macro hedge portfolio (€(234) million). In 2001, most outstanding macrohedges were tied to specific orders in the backlog to form valuation units and have been recorded as micro hedges as required by IAS 39

CONSOLIDATED INCOME TAXESIn 2000, EADS reported a consolidated income tax benefit of €220 million, compared to a tax expense of €646 million in 2001, mainlyrelated to the existence of positive taxable income in 2001, taking into account the non tax-deductible nature of goodwill amortisationand the mostly tax-free nature of dilution gains.

CONSOLIDATED NET INCOMEAs a result of the factors discussed above, EADS recorded consolidated net income of €1,372 million in 2001, as compared to a pro-forma consolidated net loss of €909 million in 2000.

CASH FLOW AND LIQUIDITY

The following table sets forth a summary of the consolidated statements of cash flows for the years ended 31st December 2001 and 2000.

Year ended31st December

2001 2000in €m pro-forma

Net cash flows provided by operating activities 2,656 3,159Including changes in working capital 2 1,460

Net cash flows generated by (used in) investing Activities(1) (1,882) (1,628)Free cash flows 774 1,531Net cash flows generated by (used in) financing Activities (677) 1,635

Including capital increase 21 1,540Effect of foreign exchange rate changes on cash and cash Equivalents 14 6Net increase (decrease) in cash 111 3,172(1) Excluding a €390 million investment in medium-term securities in 2001.

66 EADS 2001 Analysis of the Financial Situation

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EADS 2001 Analysis of the Financial Situation 67

Cash flows provided by operating activities of €2,656 million were primarily generated from improved operating performance relatedto increased sales of aircraft at Airbus, while working capital contribution to cash was neutral due to additional inventory required byincreased production volume, and lower customer advance receipts in relation to new Airbus orders.

Cash flows used in investing activities of €1,882 million were principally due to continued high levels of capital expenditures ontechnical plant and equipment, and the acquisition of Cogent, Tesat Spacecom and a share in Dornier GmbH, partially offset by the sell-down of a portion of Airbus’ sales financing assets.

Cash flows used in financing activities of €677 million were principally related to dividend payments of €404 million.

CAPITAL EXPENDITURES

Capital expenditures incurred in 2001 were funded by net cash flows from operations and from the year’s opening cash position.These capital expenditures related principally to various aircraft development programmes.

Overall, capital expenditures increased from €1,351 million in 2000 to €2,196 million in 2001. At Airbus, capital expenditures increasedfrom €657 million in 2000 to €1,433 million in 2001, reflecting the effects of the Airbus Combination, an increase in leased aircraft andinitial investments related to the A380 programme. Capital expenditures for the rest of EADS, including headquarters, remainedrelatively unchanged from 2000.

For the period 2002 to 2004, it is estimated that most of the increase in EADS’ capital expenditure will occur in connection withAirbus activities, such as the establishment and expansion of production facilities for Airbus aircraft. In particular, the developmentprogramme for the A380 ultra-large aircraft will require substantial capital expenditures EADS expects to make additional capitalexpenditures in connection with the sales financing of commercial aircraft through operating leases in response to increased demandfor such financing by its customers.

CAPITAL RESOURCES AND OTHER FINANCING

CASH FROM OPERATIONSEADS generally finances its manufacturing activities and product development programmes, and in particular the development of new commercial aircraft, through a combination of funds generated by operating activities, customers’ advance payments, risk-sharing partnerships with sub-contractors and reimbursable launch investments. In addition, EADS’ military activities benefit from government-financed research and development contracts.

CASH POOLING AND CASH MANAGEMENTIn 2001, one of the important accomplishments of the EADS integration process was the implementation of a cash pooling system,which permits Management to assess reliably and instantaneously the cash position of each subsidiary within the Group. This systemenables Management to allocate cash optimally within the Group depending upon shifting short-term needs. A cash managementprocedure is currently being rolled out on a trial basis within EADS. The procedure is designed to provide Management with amonthly updated perspective on cash generation and cash consumption for each subsidiary over the following twelve-month period.

In response to the events of 11th September 2001, and subsequent developments, Management assigned each subsidiary specificgoals to aggressively preserve cash in their operations.

FUNDINGIn July 2000, EADS completed a capital increase the proceeds of which have contributed significantly to the Company’s net cashposition. EADS continues to benefit from a strong cash position and has no current plans to increase borrowing or to issue new capitalin the financial markets. However, it is actively exploring several means of ensuring access to additional sources of financing.Contemplated financing mechanisms include a syndicated back-up facility, a commercial paper programme and/or a medium-termnote programme. Management believes that the establishment of such financing schemes will enhance its presence and standing insegments of the capital markets where EADS is not yet active.

CREDIT RATINGSEADS currently is rated A3 with a stable outlook by Moody’s, and A/negative/A-1 by Standard and Poor’s.

2001 2000in €m Note pro-forma

Revenues 5, 23 30,798 24,208Cost of sales 6 (25,235) (20,072)Gross margin 5,563 4,136

Selling, administrative and other expenses 6 (2,561) (2,510)Research and development expenses (2,046) (1,339)Other income 7 3,024 342Amortisation of goodwilland related impairment losses 10 (1,466) (429)Income before financial result, income taxesand minority interests 2,514 200

Financial result, net 8 (513) (1,315)Profit (loss) before income taxes and minority interests 2,001 (1,115)

Income taxes 9 (646) 220Minority interests 17 (14)

Net income 1,372 (909)

The accompanying notes are an integral part of these Consolidated Financial Statements.EADS uses EBIT pre-goodwill amortisation and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to income or expenses of a non-recurring nature, such asamortisation expenses of Fair Value Adjustments relating to the EADS Merger, the Airbus Combination and the formation of MBDA, as well as impairment charges.

2001 2000in €m Note pro-forma

Income before financial income, income taxesand minority interests 2,514 200

Dilution gain Airbus UK, MBDA (2,794) –Goodwill amortisation and related impairment charges 1,466 429Exceptional depreciation (fixed assets) 260 176Exceptional depreciation (financial assets) 315 –Exceptional depreciation (inventories) 275 483Income from investments (342) 111

EBIT pre goodwill amortisation and exceptionals 1,694 1,399

Consolidated Financial Statements

68 EADS 2001 Consolidated Financial Statements

Consolidated Income Statements for the years 2001 and 2000

EADS 2001 Consolidated Financial Statements 69

in €m Note 2001 2000

Assets

Intangible assets 10 10,588 8,165Property, plant and equipment 10 10,050 8,120Investments and long-term financial assets 11 4,726 4,609Fixed assets 25,364 20,894

Inventories 12 2,469 2,081Trade receivables 13 5,183 4,118Other receivables and other assets 14 2,633 2,624Securities 15 5,341 4,682Cash and cash equivalents 2,692 3,240Non-fixed assets 18,318 16,745

Deferred taxes 9 4,288 3,151

Prepaid expenses 745 654

Total assets 48,715 41,444

Liabilities and stockholders’ equity

Capital stock 809 807Reserves 10,346 9,359Accumulated other comprehensive income (1,278) 84Stockholders’ equity 16 9,877 10,250

Minority interests 559 221

Provisions 17 11,918 8,684

Financial liabilities 18 6,500 5,779Trade liabilities 19 5,466 4,268Other liabilities 19 10,631 8,200Liabilities 22,597 18,247

Deferred taxes 9 806 1,128

Deferred income 2,958 2,914

Total liabilities and equity 48,715 41,444

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Balance Sheets at 31st December 2001 and 2000

2001 2000in €m pro-forma

Net income (loss) 1,372 (909)Income applicable to minority interests (17) 14Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortisation of fixed assets 3,560 1,540Valuation adjustments 493 483Dilution gain Airbus/MBDA (2,817) 0Change in deferred taxes 109 (611)Results of fixed assets/businesses (71) 30Change in accrued liabilities 47 1,259Result of companies accounted for by the equity method (22) (107)Change in other operating assets and liabilities: 2 1,460

– Inventories, net (655) (1,201)– Trade receivables (894) 252– Trade liabilities 766 479– Other assets and liabilities 785 1,930

Cash provided by operating activities 2,656 3,159

Investments:

– Purchases of fixed assets and increase in equipment of leased assets (2,196) (1,351)– Payments for investments in financial assets and acquisitions of subsidiaries (1,096) (600)– Proceeds from disposal of fixed assets and decrease in equipment of leased assets 402 292– Proceeds from disposals of financial assets and subsidiaries 850 187– Change in finance lease receivables 138 (118)Acquisitions of securities (390) 0Cash from changes in consolidation 20 (38)Cash used for investing activities (2,272) (1,628)

Change in financial liabilities (465) 83Cash contribution minority 253 0Dividends paid (404) (31)Repayments to minorities (52) 0Capital increase 21 1,540Others (30) 43Cash used for (provided by) financing activities (677) 1,635

Effect of foreign exchange rate changes on cash and cash equivalents 14 6

Net increase (decrease) in cash and cash equivalents (279) 3,172

Cash and cash equivalents

Cash at beginning of period 7,760 4,750

Cash at end of period 7,481 7,760

additional securities medium-term 552 162

Cash and securities as stated in Balance Sheet 8,033 7,922

The following represents supplemental information with respect to cash flows from operating activities: Interest paid (335) (239)Income taxes paid (520) (206)The accompanying notes are an integral part of these Consolidated Financial Statements. Cash and cash equivalents also comprise securities.

Consolidated Financial Statementscontinued

70 EADS 2001 Consolidated Financial Statements

Consolidated Statements of Cash Flows for the years 2001 and 2000 pro-forma

EADS 2001 Consolidated Financial Statements 71

Accumulatedother

Capital comprehensivein €m Note stock Reserves income Total

Balance at 1st January 2000 pro-forma 715 8,578 84 9,377

Capital increase 80 1,366 1,446Capital increase ESOP (incl. discount) 12 193 205IPO-Costs (56) (56)Net loss (909) (909)Depreciation first half-year goodwill and fair values Dasa/Casa 197 197Other changes (10) (10)

Balance at 31st December 2000 807 9,359 84 10,250

First application of IAS 39 22 (337) (337)Balance at 1st January 2001, adjusted 807 9,359 (253) 9,913

Capital increase ESOP 24 2 19 21Net profit 23 1,372 1,372Dividend 16 (404) (404)Other comprehensive income (1,025) (1,025)

thereof changes in fair values of securities 22 (10)thereof changes in fair valuesof hedging instruments 22 (878)thereof currency translation adjustment (137)

Balance at 31st December 2001 809 10,346 (1,278) 9,877

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statements of Changes in Shareholders’ Equity for the years 2001 and 2000 pro-forma

BASIS OF PRESENTATION

1. THE COMPANYThe European Aeronautic Defence and Space Company EADS N.V. (“EADS” or the “Group”), a Dutch public company legally seatedin Amsterdam, is one of the leading manufacturers of commercial aircraft, civil helicopters, commercial space launch vehicles, missiles,military aircraft, satellites and defence electronics. The Group is the result of the merger of the operations of Aerospatiale Matra S.A.(“ASM”), the aerospace and defence activities of DaimlerChrysler AG (“Dasa”) and Construcciones Aeronauticas S.A. ("Casa") in July 2000.

For accounting purposes, the combination of ASM, Dasa and Casa was treated as a business combination using the purchase methodof accounting with ASM as the acquirer. Adjustments have been made to allocate the excess of the fair values of Dasa and Casa overtheir historical costs amounting to €5,860 million and €1,095 million, respectively, to specifically identifiable assets acquired andliabilities assumed. Goodwill resulting from the acquisitions is amortised over 20 years, the expected period of benefit.

The consolidated financial statements of the Group have been prepared in accordance with the accounting standards issued by theInternational Accounting Standards Board (“IASB”) and the interpretations issued by the Standing Interpretations Committee of theIASB, except that the Group expenses all development costs as incurred (see note 2). The financial statements were authorised forissue by the Group’s Board of Directors on 15th March 2002.

Prior to the business combination which resulted in the formation of EADS, the consolidated financial statements of ASM wereprepared in accordance with French generally accepted accounting principles (“French GAAP”). In connection with the businesscombination, the consolidated financial statements of ASM for 1999 and for the period in 2000 prior to the business combinationwere restated from French GAAP into IAS.

The Group is disclosing financial statements covering the periods 2001 and, on a pro-forma basis, 2000. Since EADS as a Group didnot exist throughout the total of the business year 2000, it cannot provide figures that cover all of this period. However, the group hasprepared pro-forma figures for the period 1st January 2000 to 31st December, 2000. These pro-forma consolidated figures of EADS,which have not been audited, provide information as if EADS had already existed as of 1st January 2000 and are meant to reflect thedevelopment of EADS business as if it had taken place in 2000. Consequently, as the Airbus UK transaction and other transactionsoccurred in 2001, the pro-forma figures for 2000 do not reflect these transactions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation – The consolidated financial statements include all of the material subsidiaries under the control of EADS. Significantinvestments in which EADS has a 20% to 50% ownership (“associated companies”) are generally accounted for using the equitymethod. For investments in material joint ventures, EADS uses the proportionate method of consolidation (see Note 3). Otherinvestments are classified as available-for-sale financial instruments and are accounted for at fair value.

For business combinations accounted for under the purchase accounting method, all assets acquired and liabilities assumed arerecorded at fair value. An excess of the purchase price over the fair value of net assets acquired is capitalised as goodwill andamortised over the estimated period of benefit on a straight-line basis.

The effects of intercompany transactions are eliminated.

Notes to Consolidated Financial Statements

72 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 73

Foreign Currencies – Transactions in foreign currencies are translated into euro at the foreign exchange rate in effect at the date of thetransaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Euro at theforeign exchange rate in effect at that date. Foreign exchange gains and losses arising from translation are recognised in the incomestatement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated intoEuro at the foreign exchange rate in effect at the date of the transaction.

Financial statements of foreign operations – The assets and liabilities of foreign entities, where the local currency is other than Euro,are generally translated using period-end exchange rates while the statements of income are translated using average exchange ratesduring the period. Differences arising from the translation of assets and liabilities in comparison with the translation of the previousperiods are included as a separate component of shareholders’ equity (“Accumulated other comprehensive income”).

Revenue Recognition – Revenues are recognised upon the transfer of risk or the rendering of a service. For construction contracts,revenues are recognised according to the percentage-of-completion method as contractually agreed-upon milestones are reached orthe work progresses. Changes in profit rates are reflected in current earnings as identified. Contracts are reviewed for possible lossesat each reporting period and provisions for estimated losses on contracts are recorded when identified.

Incentives applicable to performance on contracts are considered in estimated profit rates and are recorded when anticipated contractperformance is probable and can be reliably measured. Contract penalties are charged to expense in the period it becomes probablethat the Group will be subject to the penalties.

Sales of aircraft that include value guarantee commitments are accounted for as operating leases when these commitments are considered substantial compared to the fair value of the related aircraft. Revenues then comprise lease income from suchoperating leases.

Revenues attributable to customer financing relate principally to the financing of commercial aircraft. Such revenues include sales-type leases and finance income.

Product-Related Expenses – Expenses for advertising and sales promotion and other sales-related expenses are charged to expenseas incurred. Provisions for warranties are made at the time the related sale is recorded.

Research and Development Expenses – Research and development funded by the Group is expensed as incurred. Financedresearch and development contracts are recorded as revenues.

Income Taxes –Deferred tax assets and liabilities reflect lower or higher future tax impacts that result for certain assets and liabilitiesfrom temporary valuation differences between their carrying amounts and the tax bases as well as from net operating losses and taxcredit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of achange in tax rates is recognised in income in the period that includes the enactment date.

As deferred tax assets anticipate potential future tax benefits, they are recorded in the consolidated financial statements of EADS onlywhen the likelihood that the tax benefits will be realised is probable.

Intangible Assets – Purchased intangible assets, other than goodwill, are valued at acquisition cost and are generally amortised over their respective useful lives (3 to 10 years) on a straight line basis. Goodwill arising from purchase accounting is amortised over 5 to 20 years.

Property, Plant and Equipment – Property, plant and equipment is valued at acquisition or manufacturing costs less accumulateddepreciation. Depreciation expense is recognised principally using the straight-line method. The costs of internally producedequipment and facilities include direct material and labour costs and applicable manufacturing overheads, including depreciationcharges. The following useful lives are assumed: buildings six to 50 years; site improvements 6 to 20 years; technical equipment andmachinery 3 to 20 years; and other equipment, factory and office equipment 2 to 10 years. The cost of specialised tooling forcommercial production is capitalised and amortised over 5 years using the straight-line method. If the Group is liable for futurerestoration of leased sites, it accrues for the amount not provided for by insurances.

Investment Property – The Group accounts for investment property using the cost model. Investment property is recorded onbalance sheet at book value, that is, at cost less any accumulated depreciation and any accumulated impairment losses.

Impairment of Long-lived Assets – The Group reviews long-lived assets to be held and used for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not be recoverable.

Lease – The Group is a lessee of property, plant and equipment. All leases that meet specified criteria intended to represent situationswhere the substantive risks and rewards of ownership have been transferred to the lessee are accounted for as finance leases. Allother leases are accounted for as operating leases.

Non-fixed Assets – Non-fixed assets represent the Group’s inventories, receivables, securities and cash, including amounts to berealised in excess of one year. In the accompanying notes, the portion of assets and liabilities to be realised and settled in excess ofone year has been disclosed.

Inventories – Inventories are valued at the lower of acquisition or manufacturing cost or net realisable value. Manufacturing costscomprise direct material and labour and applicable manufacturing overheads, including depreciation charges. Borrowing costs are not capitalised.

Securities – Securities are accounted for at fair values, if readily determinable. Unrealised gains and losses on these investments areincluded within a separate component of stockholders’ equity (“Accumulated other comprehensive income”), net of applicabledeferred income taxes. All other securities are recorded at cost.

Cash and cash equivalents – Cash and cash equivalents consist of cash on hand, cash in bank, checks, and fixed deposits having ashort-term maturity.

Financial Instruments – EADS uses derivative financial instruments for hedging purposes. Financial instruments used in micro-hedging strategies to offset the Group’s exposure to identifiable and committed transactions are accounted for together with theunderlying business transactions (“hedge accounting”). The Group´s criteria for classifying a derivative instrument as a hedge include:(1) the hedge transaction is expected to be highly effective in achieving offsetting changes in cash flows attributable to the hedgedrisk, (2) the effectiveness of the hedge can be reliably measured, (3) there is adequate documentation of the hedging relationships atthe inception of the hedge. Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequentlyremeasured at fair value. The resulting gains and losses on forward contracts and options hedging cash flows mainly based on thefirm orderbook are included within a separate component of stockholders’ equity (“accumulated other comprehensive income”), netof applicable income taxes and are subsequently recognised in the income statement as a component of the related transactions,when realised (the "deferral method").

The fair values of the derivative instruments as well as the methods used by EADS to determine the fair values are disclosed in Note 22.

When a hedging instrument expires or is terminated, any cumulative gain or loss existing in accumulated other comprehensiveincome at that time remains in accumulated other comprehensive income and is recognised when the related committed transactionis ultimately recognised in the income statement. If the committed transaction is no longer expected to occur, the cumulative gain orloss that was reported in accumulated other comprehensive income is immediately accounted for as financial result.

Financial instruments that have been previously used by EADS in macro-hedging strategies and do not qualify for hedge accountingare accordingly classified as held-for-trading and carried at fair value, with changes in fair value included in other financial result. In March 1999, the International Accounting Standards Committee issued International Accounting Standard (IAS) 39, “FinancialInstruments: Recognition and Measurement”. This Standard was effective for fiscal years beginning on or after 1st January 2001.Following the introduction of IAS 39, all derivative financial instruments have been recognised as assets or liabilities. The openingbalance of equity as at 1st January 2001 has been adjusted. Prior year comparative figures have not been restated. Under the newstandard, the Group applies hedge accounting for certain foreign currency derivative contracts on qualifying cash flow hedges offuture sales as well as for certain interest rate swaps used as cash flow and fair value hedges of future interest payments. The financialeffects of adopting IAS 39 are disclosed in Note 22.

Notes to Consolidated Financial Statementscontinued

74 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 75

Up to 31st December 2000, certain of the Group’s hedging instruments have been accounted for as macro hedges. In order toachieve the same treatment as for the existing micro hedges, EADS was able to document for most of these instruments that from the date of designation, a hedging relationship existed between each position being hedged and each hedging financial instrument.The provision established for the mark to market valuation of those macro hedges as of 31st December 2000, will evolve until thecontractual term of these financial instruments.

Refundable Advances – Refundable advances from European governments are recorded as “Other Liabilities”.

Accrued Liabilities – Provisions for losses on completion of contracts – Provisions for losses on completion of contracts are recordedwhen it becomes probable that total estimated contract costs will exceed total contract revenues. Such provisions are recorded as write-downs of work-in-process for that portion of the work, which has already been completed, and as provisions for risks for the remainder.

Losses are determined on the basis of estimated results on completion of contracts and regularly updated.

Provisions for financial guarantees corresponding to aircraft sales – Sales contracts for aircraft may stipulate financial guaranteesfor lease payments, for the residual values of aircraft, for the repayment of the balance of outstanding borrowings and for the financingof the sales of certain aircraft on behalf of the Group. Guarantees may be sole, joint (e.g., with engine manufacturers) or restricted to aceiling defined in the contract. Provisions are recorded to reflect the underlying risk to the group in respect of guarantees given.

Retirement indemnities – When Group employees retire, they receive indemnities as stipulated in retirement or collectiveagreements, in accordance with regulations and practices of the countries (principally Germany and France) in which the Group operates.

French law stipulates that employees are paid retirement indemnities on the basis of the length of service. In Germany, retirementindemnities are principally paid on the basis of salaries and seniority. Certain pension plans are based on salary earned in the last year oron an average of the last three years of employment while others are fixed plans depending on ranking (both salary level and position).

Actuarial assessments are regularly made to determine the amount of the Group’s commitments with regard to retirementindemnities. This assessment includes an assumption concerning changes in salaries, retirement ages and long-term interest rates. It comprises all the expenses the Group will be required to pay to meet these commitments.

The resulting obligation is recorded in the balance sheet as a provision. Actuarial gains and losses are deferred and recorded over theremaining average service life of employees.

Use of Estimates – The preparation of financial statements requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent amounts at the date of the financial statements and reportedamounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3. SCOPE OF CONSOLIDATIONPerimeter of consolidation (31st December 2001) – The consolidated financial statements include, in addition to EADS N.V.:

• 206 companies which are fully consolidated, • 33 companies which are proportionately consolidated,• 17 companies, which are investments in associates and are accounted for using the equity method.

The significant subsidiaries, associates, and joint ventures are listed in the appendix entitled “Information on principal investments”.

4. MAJOR EVENTSCreation of EADSEADS was created as of 10th July 2000. For accounting purposes, the combination of ASM, Dasa, and Casa was treated as a businesscombination using the purchase method of accounting. As a result, the balance sheets of Dasa and Casa were revalued to reflect fairmarket value of acquired assets and liabilities, while the balance sheet of ASM was included in the EADS at historical cost.

First Application of IAS 39As of 1st January 2001, EADS applied IAS 39 “Financial Instruments: Recognition and Measurement”. For the vast majority ofderivative financial instruments used to hedge mainly firm commitments, EADS fulfils the qualifying criteria for hedge accounting. As a result, provisions have increased by €1.9 billion to €3.7 billion as at 31st December 2001. The net effect is shown as a decrease inconsolidated equity, within a separate component of stockholders’ equity (“accumulated other comprehensive income”), net ofapplicable deferred income taxes.

Airbus UK TransactionAs of 1st January 2001, the date when EADS gained economic control, the new integrated Airbus company (Airbus SAS) has beenconsolidated 100% within EADS. Legal closing of the transaction was 11th July 2001. The new Airbus company is now held 80% byEADS and 20% by BAE Systems (“BAES”).

The main accounting impacts of this transaction are as follows:

• Airbus UK as well as its 20% participation in Airbus GIE have been transferred to EADS. In exchange for the contribution of AirbusUK to Airbus SAS at fair value, BAES received 20% of Airbus SAS’s shares.

• The key financial impacts of this transaction include the recognition of a goodwill of about €4 billion, fair value adjustments ofapproximately €0.5 billion, and a dilution gain of about €2.5 billion.

Creation of MBDAOn 18th December 2001, EADS, BAES and Finmeccanica signed the agreement establishing MBDA as a legal operating entity.MBDA is jointly owned with 37.5% by EADS and BAES, respectively and 25% by Finmeccanica.

The main accounting impacts are as follows:

• EADS has transferred its shares in Aerospatiale Matra Missiles and Matra BAE Dynamics to MBDA in exchange for 37.5% of Alenia Marconi Systems; the purchase accounting method was applied. The transaction resulted in a dilution gain amounting to €0.3 billion.

• To better reflect the substance of the MBDA transaction, EADS consolidates proportionately 50% of MBDA with a disclosure of12.5% minority interest instead of a proportionate consolidation of its economic interest of 37.5%. This method has been chosenbecause EADS together with BAES jointly controls the operations of MBDA.

Tesat-SpacecomOn 30th November 2001, Astrium Group, which is consolidated proportionally at 75% within EADS and as part of Space Division,acquired Tesat-Spacecom GmbH & Co. KG, Germany, (formerly Bosch-Satcom GmbH), the Space/Communications and relatedbusinesses of Robert Bosch Group. The acquisition was accounted for under the purchase method. The initial goodwill was valued at€0.1 billion and will be depreciated over a period of 20 years. Astrium anticipates finalising the TESAT-COM purchase price allocationduring 2002.

Nortel Joint VenturesAs of the beginning of the fourth quarter 2001, modifications initiated by Nortel in the management structure of the Nortel jointventures led EADS to change its accounting treatment regarding its 42% investment in Nortel Networks Germany and its 45%investment in Matra Nortel Communications. As a result, Nortel Networks Germany and Matra Nortel Communications are now included in EADS’ financial statements as non-consolidated investments. Before 1st October 2001, the equity method had been applied.

DornierIn 2001 several Dornier family members being shareholders of Dornier GmbH exercised a put option and offered 17.5% of the sharesin Dornier GmbH to DaimlerChrysler. DaimlerChrysler in return had the right to have DADC Luft- und Raumfahrt Beteiligungs AG(“DADC”), a subsidiary of EADS, buy the shares at fair market value. As a result, EADS holds indirectly through DADC 76% of theshare capital of Dornier GmbH (2000: 58%).

CogentOn 1st December 2001, EDSN acquired Cogent Defence Systems. The acquisition was accounted for under the purchase method.The initial goodwill was valued at €0.1 billion and will be depreciated over a period of ten years.

Notes to Consolidated Financial Statementscontinued

76 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 77

NOTES TO THE CONSOLIDATED STATEMENTS OF INCOME

5. REVENUESRevenues in 2001 reach €30,798 million (2000 pro-forma: €24,208 million). This increase is mainly due to the full consolidation of newAirbus Group for the first time, to a growth in aircraft deliveries at Airbus as well as to the average currency exchange rate increase ofUS dollar to euro from the prior year same period.

Revenues are comprised of sales of goods and services, which relate mainly to sales of commercial airplanes, as well as of revenuesassociated with construction contracts accounted for under the percentage-of-completion-method, financed research anddevelopment, customer financing revenues and others.

6. FUNCTIONAL COSTS AND OTHER EXPENSESCost of sales and other functional costs include cost of materials as follows:

Year ended31st December

in €m 2001 2000

Cost of raw materials, supplies and resale products 14,401 11,232Cost of purchased services 5,635 3,886

20,036 15,118

Selling, administrative and other expenses are comprised of the following:Year ended

31st Decemberin €m 2001 2000

Selling expenses 800 710Administration expenses 1,386 1,180Other expenses 375 620

2,561 2,510

Other expenses include losses from sales of fixed assets (€20 million and €50 million in 2001 and 2000, respectively) and additions toother accruals (€34 million and €124 million in 2001 and 2000, respectively).

Personnel expenses of €6,863 million are comprised of wages, salaries and social contributions amounting €6,606 million as well asnet periodic pension cost (see Note 17a) of €257 million.

7. OTHER INCOMEOther income mainly comprises the dilution gain as a result of the Airbus UK transaction (see Note 4) as well as a dilution gain as aresult of the MBDA transaction, totalling €2,817 million, rental income (€21 million and €49 million in 2001 and 2000, respectively).

8. FINANCIAL RESULTThe table below sets forth the financial result of the group:

Year ended31st December

in €m 2001 2000

Income (loss) from investments (342) 111Interest income 63 10Other financial loss (234) (1,436)

(513) (1,315)

The loss from investments in 2001 is mainly driven by a depreciation, following an impairment test, of Matra Nortel Communicationsand Nortel Networks Germany totalling €(315) million. Additionally included is the result on equity investments of €22 million mainlycomprised of Dassault €(111) million and Nahuelsat (€(63) million).

Other financial loss in 2001 and 2000 mainly results from mark-to-market revaluation of financial instruments that do not qualify forhedge accounting (see Note 22 on Financial Instruments).

9. INCOME TAXESIncome (loss) before income taxes and minority interests amounted to €2,001 million for the year ended 31st December 2001 (2000: €(1,115) million).

The (expense) benefit for income taxes consists of the following:Year ended

31st Decemberin €m 2001 2000

Current tax expense (549) (405)Deferred tax (expense)/benefit (97) 625

(646) 220

For the Group’s German subsidiaries, the deferred taxes at 31st December 2001 are calculated using a federal corporate tax rate of25% (2000: 25%) plus a solidarity surcharge of 5.5% for each year on federal corporate taxes payable plus the after federal tax benefitrate for trade tax of 12.125% (2000: 12.125%). Including the impact of the surcharge and the trade tax, the tax rate applied to Germandeferred taxes amounts to 38.5% (2000: 38.5%).

In 2000, the German government enacted new tax legislation which reduces the Group’s statutory corporate tax rate for its Germansubsidiaries from 40% on retained earnings and 30% on distributed earnings to a uniform 25%, effective beginning 1st January 2001.

In France, the corporate tax rate in effect for 2000 was 331⁄3% plus a surcharge of 10%. The French government has established for the years 2001 and 2002 a reduced surcharge of 6% in 2001 and 3% in 2002. Accordingly, deferred tax assets and liabilities for theGroup’s French subsidiaries were calculated using the enacted tax rate of 35.43% for temporary differences. The effects of the taxrate reduction on the year-end 2001 and 2000 deferred tax assets and liabilities are reflected in the reconciliation presented below.

The following table shows a reconciliation from an expected income tax expense – using the Dutch corporate tax rate of 35% – to thereported tax expense (2000: benefit). The reconciling items represent non-taxable benefits or non-deductible expenses coming frompermanent differences between the local tax base and the reported financial statements according to IAS rules.

Year ended31st December

in €m 2001 2000

Profit (loss) before income taxes and minority interests 2,001 (1,115)x Corporate income tax rate 35% 35%Expected benefit (expense) for income taxes (700) 390Effect of changes in tax laws (1) 88Foreign tax rate differential (4) 24Dilution gains 936 –Goodwill amortisation (588) (192)Write down of deferred tax assets (264) (129)Tax credit for R&D expenses 48 28Other (73) 11Reported tax benefit (expense) (646) 220

In 2001, the tax effect of the non-deductable depreciation of certain investments is reflected above in other (€(73) million).

Notes to Consolidated Financial Statementscontinued

78 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 79

Deferred income taxes reflect temporary valuation differences on certain assets and liabilities between their carrying amount in thefinancial statements and the tax bases. Future tax impact from net operating losses and tax credit carry forwards are also consideredin the deferred income tax calculation. Deferred income taxes are recorded on the following assets and liabilities:

31st Decemberin €m 2001 2000

Intangible assets 12 20Investments and long-term financial assets – 12Inventories 379 193Prepaid expenses 174 203Net operating loss and tax credit carryforwards 613 343Retirement plans 498 473Other accrued liabilities 2,239 1,059Liabilities 585 743Deferred income 870 594

5,370 3,640Write down of deferred tax assets (625) (360)

Deferred tax assets 4,745 3,280

Property, plant and equipment 1,046 975Investments and long-term financial assets 81 –Receivables 107 259Other 29 23

Deferred tax liabilities 1,263 1,257Deferred tax assets, net 3,482 2,023

At 31st December 2001, the Group had domestic corporate tax net operating losses (“NOLs”) amounting to €62 million, foreign NOLsand credit carryforwards amounting to €1,568 million, and foreign trade tax NOLs amounting to €726 million. The amount of theGroup’s deferred tax valuation allowances is based upon management’s estimate of the level of deferred tax assets that will berealised. In future periods, depending upon the Group’s financial results, management’s estimate of the amount of the deferred taxassets considered realisable may change, and hence the write down of deferred tax assets may increase or decrease.

After netting of deferred income tax assets and liabilities within the same taxable entity and maturity, the deferred income tax assetsand liabilities in the consolidated balance sheets are as follows:

31st December 31st December2001 2000

thereof thereofin €m Total non-current Total non-current

Deferred tax assets 4,288 2,924 3,151 2,419Deferred tax liabilities (806) (689) (1,128) (691)Deferred tax assets, net 3,482 2,235 2,023 1,728

The deferred tax recognised directly in equity during the period is as follows:

in €m 2001

Effect of adopting IAS 39 222Fair value reserves in equity:Available-for-sale investments 1Cash flow hedges 606Total 829

NOTES TO THE CONSOLIDATED BALANCE SHEETS

10. INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT, NETIntangible assetsIntangible assets principally represent goodwill. Schedules detailing gross, accumulated depreciation and net values of intangibleassets are as follows:

CostBalance at Changes in Balance at

1st January Exchange consolidation Reclassifi- 31st Decemberin €m 2001 differences Additions scope cation Disposals 2001

Other intangible assets 305 2 96 (3) – (22) 378Goodwill 8,442 2 4,453 – (389) (245) 12,263Total 8,747 4 4,549 (3) (389) (267) 12,641

AmortisationBalance at Changes in Balance at

1st January Exchange Amortisation consolidation Impairment 31st Decemberin €m 2001 differences charge scope charge Disposals 2001

Other intangible assets (189) (1) (61) 3 – 16 (232)Goodwill (393) (1) (676) – (790) 39 (1,821)Total (582) (2) (737) 3 (790) 55 (2,053)

Carrying amountBalance at Balance at

1st January 31st Decemberin €m 2001 2001

Other intangible assets 116 146Goodwill 8,049 10,442Total 8,165 10,588

Goodwill increased mainly due to the purchase of Airbus UK and 20% stake in Airbus GIE.

Reclassification of goodwill €(389) million results from €(516) million related to the Nortel Joint Venture reclassified to financial assets,partly offset by €127 million from other receivables and other assets to goodwill (see Note 14). As a result of the creation of MBDA,€209 million of goodwill considered at the time of the Aerospatiale Matra transaction have been included in the computation of thenet dilution gain and is shown within disposals.

Impairment lossIn 2001, following the events caused by the terrorist attacks on 11th September 2001, the Group performed an impairment test onrecognised goodwill for the Airbus division. The recoverable amount of Airbus, which is to be seen as a cash generating unit on itsown, is exceeding the carrying amount. Therefore, no goodwill has to be impaired.

Further impairment tests were performed for the Space and Defence divisions. Based on current forecasts the Group performedimpairment tests which resulted in impairment charges as follows:

• Space division: Goodwill for Astrium had to be impaired by €210 million.• Defence division: Impairment charges on goodwill for Systems & Defence Electronics (S&DE) of €240 million, LFK of €170 million

and Matra Datavision of €170 million had to be recognised.

The impairment tests had been performed using the discounted cash-flow method.

Notes to Consolidated Financial Statementscontinued

80 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 81

Property, plant and equipment Schedules detailing gross, accumulated depreciation and net values of property, plant and equipment show the following:

CostChange in

consolidationBalance at scope and Balance at

1st January exchange Reclassifi- 31st Decemberin €m 2001 Additions differences cation Disposals 2001

Land, leasehold improvements and buildings including buildings on land owned by others 3,523 205 109 106 (67) 3,876Technical equipment and machinery 3,295 270 770 255 (78) 4,512Other equipment, factory and office equipment 5,279 923 1,176 30 (189) 7,219Advance payments relating to plant and equipment and construction in progress 443 701 111 (342) (101) 812Total 12,540 2,099 2,166 49 (435) 16,419

DepreciationChange in

consolidationBalance at scope and Balance at

1st January Depreciation exchange Reclassifi- 31st Decemberin €m 2001 charge differences cation Disposals 2001

Land, leasehold improvements and buildings including buildings on land owned by others (1,038) (183) (32) (17) 3 (1,267)Technical equipment and machinery (1,875) (477) 10 21 62 (2,259)Other equipment, factory and office equipment (1,496) (840) (365) (188) 56 (2,833)Advance payments relating to plant and equipment and construction in progress (11) (1) – 2 – (10)Total (4,420) (1,501) (387) (182) 121 (6,369)

Carrying amountBalance at Balance at

1st January 31st Decemberin €m 2001 2001

Land, leasehold improvements and buildings including buildings on land owned by others 2,485 2,609Technical equipment and machinery 1,420 2,253Other equipment, factory and office equipment 3,783 4,386Advance payments relating to plant and equipment and construction in progress 432 802Total 8,120 10,050

Reclassification of other equipment, factory and office equipment (€188 million) includes an allocation of Aircraft financial riskprovisions for leased aircraft of €169 million.

Additions to property, plant and equipment represent largely leased aircraft at Airbus and Aeronautics divisions as well as additions tofacilities. The change in consolidation scope represents mainly the first time consolidation of Airbus UK and 20% stake in Airbus GIE.

Leased aircraft classified as operating lease equipment are included in the position “Other equipment, factory and office equipment”and represent amounts at cost of €3,206 million and €2,816 million as at 31st December 2001 and 2000, respectively (net ofaccumulated depreciation of €1,384 million and €610 million). The related depreciation expense for 2001 amounts to €419 million(2000: €177 million). These aircraft classified as operating lease include aircraft that have been accounted for as leases because ofsubstantial value guarantee commitments of €1,912 million and other aircraft €1,294 million.

Property, plant and equipment include buildings, technical equipment and other equipment accounted for in fixed assets underfinance lease agreements for net amounts of €169 million (net of accumulated depreciation of €273 million) as at 31st December 2001and €195 million as at 31st December 2000.

Non-cancellable future lease payments due from customers for equipment on operating leases to be included in revenues, at 31st December 2001 are as follows:

2002 €195m2003 €193m2004 €191m2005 €189m2006 €178mthereafter €443m

11. INVESTMENTS AND LONG-TERM FINANCIAL ASSETSThe following table sets forth the composition of investments and long-term financial assets:

31st December 31st Decemberin €m 2001 2000

Equity investments 1,252 1,318Other investments 766 422Other financial assets 2,708 2,869Total 4,726 4,609

Equity investments comprise for 2001 the 45.96% (2000: 45.76%) interest in Dassault Aviation of €1,252 million (2000: €1,164 million).A list of the investments in associates is included in Appendix “Information on principal investments”. All significant investments inassociates have been accounted for using the equity method.

Other investments comprise a 42% interest in Nortel Networks Germany of €156 million and a 45% interest in Matra NortelCommunications of €119 million. At 31st December 2000, these investments had been recorded at equity with €55 million and €70 million, respectively. The increase in 2001 is mainly derived from the allocation of related goodwill. Other financial assets includeloans to customers of €949 million and finance lease receivables from aircraft financing operations of €514 million. Other financialassets also include security deposits of €1,044 million and other loans, e.g. to employees of €201 million.

The components of investment in finance leases are as follows:At 31st December

in €m 2001

Minimum lease payments receivables 1,022Unearned finance income (222)Allowance (286)Total 514

Future minimum lease payments and investments in finance leases to be received are as follows:

2002 €128m2003 €117m2004 €121m2005 €92m2006 €90mthereafter €474m

Notes to Consolidated Financial Statementscontinued

82 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 83

12. INVENTORIESAt 31st December

in €m 2001 2000

Raw materials and manufacturing supplies 929 749Work in progress 6,590 5,045Finished goods, parts and products held for resale 3,314 2,027Advance payments to suppliers 1,230 1,125

12,063 8,946Less: Advance payments received (9,594) (6,865)

2,469 2,081

13. TRADE RECEIVABLESAt 31st December

in €m 2001 2000

Receivables from sales of goods and services 5,572 4,494Allowance for doubtful accounts (389) (376)

5,183 4,118

As of 31st December 2001, €155 million of the trade receivables mature after more than one year.

14. OTHER RECEIVABLES AND OTHER ASSETSOther receivables and other assets include an amount of €454 million (2000: €771 million) corresponding to the remaining capitalisedsettlement payment to the German Government with respect to refundable advances which is amortised through the incomestatement at the delivery pace of the corresponding planes. Due to additional evidence regarding these refundable advancessubsequent to acquisition date (1st July 2000) resulting from a valuation study for Airbus long range airplanes, a part of the amountassigned to this asset was reclassified as goodwill. The adjustment to the fair value as compared to when the acquisition was originallyaccounted for amounts to a reduction of €206 million in other assets at the date of acquisition of Dasa by ASM to form EADS.Corresponding to that, deferred tax liabilities have been reduced by €79 million and goodwill increased by €127 million.

Other receivables and other assets further comprise receivables from affiliated companies of €189 million (2000: €183 million) andreceivables from related companies of €352 million (2000: €398 million), net of allowance of €(112) million (2000: €(25) million).

As of 31st December 2001, €1,023 million of other receivables and other assets mature after more than one year (2000: €681 million).

15. SECURITIESThe securities of €5,341 million (2000: €4,682 million) comprise mainly “Available-for-Sales Securities” amounting to €5,317 million(2000: €4,655 million).

16. SHAREHOLDERS’ EQUITYThe issued share capital of the Group consists of 809,175,561 ordinary shares as at 31st December 2001 (2000: 807,157,667). The authorised share capital consists of 3,000,000,000 shares. The shares have a par value of €1.00.

In connection with the ESOP 2001 – Employee Stock Ownership Plan – (see Note 24), EADS issued 2,017,894 shares with a nominalvalue of €1.00, representing a nominal value of €2,017,894.00.

The Group’s Board of Directors took decisions on 12th July and 18th September 2001 to launch a share buy back plan as approved bythe general meeting of shareholders on 10th May 2001. As a result, the Board of Directors requested the Chief Executive Officers toset up a buy back plan for 10,500,000 shares. In 2001, the Group has not bought back any shares.

On 10th May 2001, the general meeting of shareholders further decided to pay a cash dividend for 2000 for a gross amount of €0.50per share, which was paid on 27th June 2001.

The change of shareholders’ equity is provided in the Consolidated Statements of Changes in Shareholders’ Equity.

17. PROVISIONSAt 31st December

in €m 2001 2000

Retirement plans (see Note 17a) and similar obligations 3,176 2,986Other provisions (see Note 17b) 8,742 5,698

11,918 8,684

€3,128 million (2000: €2,836 million) of retirement plans and similar obligations and €4,460 million (2000: €2,894 million) of otherprovisions have a maturity of more than one year.

a) Retirement plansWhen Group employees retire, they receive indemnities as stipulated in retirement agreements, in accordance with regulations andpractices of the countries (principally France and Germany) in which the Group operates. French law stipulates that employees arepaid retirement indemnities on the basis of the length of service. In Germany, retirement indemnities are paid on the basis of salariesand seniority.

The following provides information with respect to the Group’s pension liabilities.At 31st December

in €m 2001 2000

Change in defined benefit obligations:

Defined benefit obligations at beginning of year 3,512 3,510Service cost 84 81Interest cost 220 195Plan amendments (8) 3Actuarial (gains) losses 191 (159)Acquisitions and other 12 1Benefits paid (131) (119)

Defined benefit obligations at end of year 3,880 3,512

The defined benefit obligation at end of the year is the present value, without deducting any plan assets, of expected futurepayments required to settle the obligation resulting from employee service in the current and prior periods.

Change in plan assets:

Fair value of plan assets at beginning of year 682 594Actual return on plan assets (70) 88Contributions 1 38Benefits paid (42) (38)

Fair value of plan assets at end of year 571 682

The fair value of plan assets at end of the year comprises assets held by long-term employee benefit funds that exist solely to pay orfund employee benefits.

A reconciliation of the funded status to the amounts recognised in the consolidated balance sheets is as follows:At 31st December

in €m 2001 2000

Funded status1 3,309 2,830Unrecognised actuarial net gains (losses) (158) 129

Net amount recognised 3,151 2,959

1 Difference between the defined benefit obligations and the fair value of plan assets.

Notes to Consolidated Financial Statementscontinued

84 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 85

The net amount recognised represents the amount recognised as a defined benefit pension liability and is part of the caption“Retirement plans and similar obligations”. It includes the funded status, adjusted by actuarial net gains/losses, which do not have tobe recognised because they do not meet the recognition criteria. The difference between the net amount recognised as pensionliability (€ 3,151 million; 2000: € 2,959 million) and the total amount of retirement plans and similar obligations (€ 3,176 million; 2000: € 2,986 millions) is caused mainly by additional commitments for deferred compensation, which in the year of its origin do notform part of the net amount recognised as pension liability.

The weighted-average assumptions used in calculating the actuarial values of the retirement plans were as follows:2001 2000

Assumptions as of 31st December: % %

Discount rate 5.0 – 6.0 5.0 – 6.5Rate of compensation increase 3.0 – 3.5 1.5 – 3.0Inflation rate 2.0 2.0 – 2.5

For the Group’s German entities, the applied interest rate used in the actuarial opinion dropped from 6.5% to 6.0%.

The components of the net periodic pension cost, included in Income before financial result income taxes and minority interests, wereas follows:

2001 2000in €m pro-forma

Service cost 84 81Interest cost 220 195Expected return on plan assets (47) (48)Net periodic pension cost 257 228

b) Other provisionsOther provisions consisted of the following:

At 31st Decemberin €m 2001 2000

Aircraft financial risks 1,498 981Services to be supplied 820 918Contract losses 450 338Warranties 198 263Financial instruments 3,673 1,140Other risks and charges 2,103 2,058

8,742 5,698

The increase in provision for Aircraft financial risks is mainly due to Airbus first time 100% consolidation and to the adaption of thelevel of the provision to the net exposure. The increase in provisions for financial instruments is due to IAS39 first-time application,hedge portfolio increase and US$ strengthening against euro and UK£.

Development of provisions in €m Total

as of 31/12/2000 5,698Change in consolidation scope 591Change in financial instruments (provision) 1,695Reclassification from deferred income and prepaidexpenses to financial instruments (provision) 607Additions/Utilisation 151as of 31/12/2001 8,742

18. FINANCIAL LIABILITIESAt 31st December

in €m 2001 2000

Bonds 426 270Liabilities to financial institutions 286 379Liabilities to affiliated companies 90 52Loans 106 97Liabilities from finance leases 110 75Others 444 130

Short-term financial liabilities (due within one year) 1,462 1,003Bonds 195 599Liabilities to financial institutions 1,541 1,447

thereof due in more than five years: 1,162 (2000: 1,031)Liabilities to affiliated companies 18 0

thereof due in more than five years: 9 (2000: 0)Loans 1,648 1,169

thereof due in more than five years: 1,217 (2000: 713)Liabilities from finance leases 1,636 1,561

thereof due in more than five years: 1,094 (2000: 1,150)

Long-term financial liabilities 5,038 4,7766,500 5,779

The rise in financial liabilities by €721 million to €6,500 million is caused by first time consolidation of Airbus UK and the additional20% of Airbus GIE. Included in Others are financial liabilities against joint venture partners.

Aggregate amounts of financial liabilities maturing during the next five years and thereafter are as follows:there-

in €m 2002 2003 2004 2005 2006 after

Financial liabilities 1,462 497 319 313 427 3,482

19. TRADE AND OTHER LIABILITIESAt 31st December

in €m 2001 2000

Trade liabilities 5,466 4,268Other liabilities 10,631 8,200

16,097 12,468

In the trade liabilities as of 31st December 2001, €173 million (2000: €202 million) mature after more than one year. Included in “other liabilities” are €2,024 million (2000: €1,136 million) maturing after more than five years.

At 31st December 2001, other liabilities mainly comprise customer advance payments of €4,509 million (2000: €3,811 million), as wellas European Governments refundable advances of €3,469 million (2000: €2,088 million). They also include further liabilities to relatedparties of €68 million (2000: €103 million) and to affiliated parties amounting to €85 million (2000: €39 million). The increase inEuropean Governments refundable advances results mostly from the first consolidation of Airbus UK.

Notes to Consolidated Financial Statementscontinued

86 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 87

OTHER NOTES

20. LITIGATION AND CLAIMSVarious legal actions, governmental investigations, proceedings and other claims are pending or may be instituted or asserted in thefuture against the Group. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable withassurance. It is reasonably possible that the final resolution of some of these matters may require the Group to make expenditures, in excess of established reserves, over an extended period of time and in a range of amounts that cannot be reasonably estimated.The term “reasonably possible” is used herein to mean that the chance of a future transaction or event occurring is more than remotebut less than likely. Although the final resolution of any such matters could have a material effect on the Group’s consolidatedoperating results for the particular reporting period in which an adjustment of the estimated reserve is recorded, the Group believesthat any resulting adjustment should not materially affect its consolidated financial position.

21. COMMITMENTS AND CONTINGENCIESAt 31st December 2001, in relation to its Airbus and its ATR activities, EADS is contingently liable for credit guarantees and hasparticipations in financing receivables under certain customer finance programmes. When contracting such customer financingexposure, Airbus and ATR have generally established a secured position in the aircraft being financed. EADS believes that theestimated fair value of the aircraft securing such commitments will substantially offset any potential losses from the commitments.Provisions are taken to cover any shortfall between the amount of financing commitments given and the fair market value of theaircraft financed. Additionally, the Group entered into commitments to provide financing with respect to aircraft on order, includingoptions for delivery in the future. The risk that such commitments be exercised is considered remote. Exposure is only recognisedwhen a financing is in place, which occurs upon delivery of the aircraft.

Despite the underlying collateral, if Airbus should be unable to honour its obligations, certain EADS and BAE SYSTEMS groupcompanies retain joint and several liability for sales financing exposure incurred by Airbus prior to 1st January 2001. EADS’ exposure toliabilities incurred by Airbus following 1st January 2001 is limited by its status as a shareholder in Airbus SAS. With respect to ATR, eachshareholder is jointly and severally liable to third parties without limitation. The liability is limited to each partner’s proportionate share.

Commitments (€245 million; 2000: €299 million) include contingent liabilities principally representing guarantees of indebtedness,contractual guarantees and commitments as to contractual performances.

In addition, the Group has granted some European governments and other customers performance bonds in connection with orders.

Operating lease commitmentsFuture nominal rental expenses for rental and lease agreements, which have initial or remaining terms in excess of one year at 31st December 2001 are as follows:

in €m Operating leases

2002 4162003 4002004 4162005 3912006 395thereafter 2,866

The total of these future commitments of €4,884 million includes aircraft lease commitments relating mostly to Airbus of €3,945million and procurement operations (e.g., facility leases, car rentals) of €839 million. Aircraft lease commitments arise from aircrafthead-leases and are typically backed by corresponding sublease income from customers. A large part of these Airbus leasecommitments (€2,092 million) arises from transactions that were sold down to third parties, which assume liability for the payments.The nominal value of future Airbus aircraft lease commitments where EADS bears the risk is €1,853 million. EADS determines itsgross exposure to such operating leases as the present value of the related payment streams.

22. INFORMATION ABOUT FINANCIAL INSTRUMENTSa) Financial risk managementBy the nature of the activities carried out, EADS is exposed to a variety of financial risks, especially foreign currency exchange raterisks and interest rate risks, as explained below. The management of such financial risks at EADS is carried out by a central treasurydepartment under policies approved by the Board of Directors. The identification, evaluation and hedging of the financial risks is inthe responsibility of the operating companies.

Foreign currency exchange rate risks – EADS’ revenues are mainly denominated in US dollars, whereas the major portion of itscosts are incurred in euros. Consequently, to the extent that EADS does not use financial instruments to cover its foreign currencyexchange rate exposure from the time of a customer order of equipment to the time of its delivery, its profits will be affected bychanges in the euro-US dollar exchange rate. As the Group intends to generate profits only from its operations and not throughspeculation on foreign currency exchange rate movements, EADS uses hedging strategies to manage and minimise the impact ofexchange rate fluctuations on these profits. At inception of the Group, EADS’ foreign exchange hedge position was the result of thecombination of the outstanding hedging portfolio of ASM, Dasa and CASA.

EADS manages a long-term hedging portfolio with a maturity of several years covering US dollar sales, mainly from the activities ofAirbus. EADS is designating part of the underlying items as the hedged position to cover its US dollar exposure, primarily usingforeign currency forwards and option contracts. Apart from plain forwards, the other main currency strategy in place as of 31st December 2001 encompasses synthetic forwards, which are a combination of purchases of US dollar puts and sales of US dollarcalls, each with the same notional amount and maturity.

EADS endeavours to hedge the majority of its exposure based on the firm orderbook but with a decreasing hedging proportionaccording to time. EADS hedges between 50% and 100% of firm sales in US dollar for the following year up to 2008. The coverageratio may be adjusted to take into account macroeconomic movements affecting the spot and interest rates, as applicable.

Interest rate risk – The Group uses several types of instruments to manage interest rate risk and thus to minimise its financialexpenses and achieve a better balance between fixed and variable rate debt or placements.

Hedging instruments that are specifically designated to debt instruments have at the maximum the same nominal amounts as well asthe same maturity dates compared to the hedged item, with the exception of a few residual positions with non-material positive mark-to-market effects. In general, EADS is only investing in short-term instruments and/or instruments that are related to a floating interestindex in order to further minimise any interest risk in its cash and securities portfolio.

Liquidity risk – The Group policy is to maintain sufficient cash and cash equivalents or have available funding through an adequateamount of committed credit lines facilities to meet its future commitments. Any excess cash is invested in non-speculative financialinstruments, mostly listed securities that are actively traded.

b) Notional amounts and credit riskThe contract or notional amounts of derivative financial instruments shown below do not always represent amounts exchanged by theparties and, thus, are not necessarily a measure for the exposure of the Group through its use of derivatives.

The notional amounts of derivative financial instruments are as follows, specified by year of expected maturity:

Remaining Period

Not One yearexceeding up to More than

in €m one year five years five years 2001 2000

Foreign exchange contracts

Net forward sales contracts 6,160 19,094 4,800 30,054 16,705Purchase put options, net 3,290 1,507 0 4,797 4,807

Sale of call options, net 4,184 1,507 0 5,691 9,236

Interest rate contracts:

Interest rate swaps 287 715 0 1,002 963CAP purchases 16 45 0 61 144Floor sales 16 45 0 61 69

Notes to Consolidated Financial Statementscontinued

88 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 89

EADS may be exposed to credit-related losses to the extent of non-performance by counterparts to financial instruments. EADS has,however, set up a credit line system, where every authorised counterpart (chosen among international financial institutions andcorporations) is granted a ceiling for outstanding market transactions. The ceilings are based on the ratings given by established ratingagencies and on the equity and profit figures of each counterpart. Exposure with respect to credit lines is regularly checked by therelevant control officers. Due to the quality of the selected counterparts, EADS believes that the overall credit risk related to financialinstruments is appropriate.

c) Fair value of financial instrumentsThe fair value of a financial instrument is the price at which one party would assume the rights and/or duties of another party. Fair values of financial instruments have been determined with reference to available market information at the balance sheet date and the valuation methodologies discussed below. Considering the variability of their value-determining factors and the volume offinancial instruments, the fair values presented herein may not be indicative of the amounts that the Group could realise in a currentmarket exchange.

The carrying amounts and fair values of the Group’s financial instruments are as follows:At 31st December At 31st December

2001 2000Carrying Fair Carrying Fair

in €m amount value amount value

Balance Sheet Treasury Instruments

Assets:

Financial assets 4,726 4,726 4,609 4,609Securities 5,341 5,341 4,682 4,682Cash and cash equivalents 2,692 2,692 3,240 3,240

Liabilities:

Financial liabilities 6,500 6,500 5,779 5,779

Derivative Financial Instruments

Currency contracts with positive fair values 54 54 0 80Currency contracts with negative fair values (3,673) (3,673) (1,746) (2,432)Interest rate contracts with positive fair values 38 38 0 0Interest rate contracts with negative fair values (29) (29) 0 0

The fair value gains and losses at 31st December 2001 on open currency contracts which hedge future foreign currency sales will betransferred from the accumulated other comprehensive income to the income statement when the related transactions occur, atvarious dates between the balance sheet date and seven years from the balance sheet date.

Financial Assets and Liabilities – Fair values are based on estimates using various valuations techniques, such as present value offuture cash flows. However, methods and assumptions followed to disclose data presented herein are inherently judgmental andinvolve various limitations, including the following:

• fair values presented do not take into consideration the effects of future interest rate and currency fluctuations,• estimates as of 31st December 2001 and 2000 are not necessarily indicative of the amounts that the Company would record upon

further disposal/termination of the financial instruments.

The methodologies used are as follows:

Short-term investments, cash, short-term loans, suppliers – The carrying amounts reflected in the annual accounts are reasonableestimates of fair value because of the relatively short period of time between the origination of the instruments and its expectedrealisation.

Long-term debt; short-term debt – The long- and short-term debt are not classified as liabilities held for trading, therefore no fairvalue computation is exercised.

Securities – The fair value of securities included in available-for-sale investments is estimated by reference to their quoted marketprice at the balance sheet date.

Currency and Interest Rate Contracts – The fair value of these instruments is the estimated amount that the Company wouldreceive or pay to settle the related agreements as of 31st December 2001 and 2000.

d) Impact of adoption of IAS 39 on Shareholders’ equity and individual balance sheet captionsThe Group adopted IAS 39 at 1st January 2001. In accordance with IAS 39, the comparative financial statements for periods prior tothe effective date of the standard have not been restated. The impact on “accumulated other comprehensive income”, a separatecategory of equity, and on the related balance sheet captions is disclosed in the following tables.

Summary of impacts on “accumulated other comprehensive income”Available-for- Hedging

in €m sale-Investments instruments Total

Balance of other comprehensive income at 31st December 2000 84 – 84Adoption of IAS 39 at 1st January 2001:

Gains/losses on remeasurement to fair value – (606) (606)Deferred income taxes – 222 222Balance at 1st January 2001 – (384) (384)

Movements in year ended 31st December 2001:

Gains/losses from changes in fair value (11) (1,964) (1,975)Deferred income taxes 1 720 721

(10) (1,244) (1,254)

Transferred to income statement – 311 311Deferred income taxes – (114) (114)

– 197 197

Balance at 31st December 2001:

Gross amount of gains and losses 73 (2,259) (2,186)Deferred income taxes 1 828 829

74 (1,431) (1,357)

Minority interest 216(1,215)

The amount of €(1,215) million refers to changes to other comprehensive income caused by hedging instruments after deductingminority interests. It can be tied to the changes to other comprehensive income as stated in the Consolidated Statements of Changesin Shareholders’ Equity as follows: €1,215 million comprise €(337) million resulting from the first-time application of IAS 39 and €(878) million that constitute changes in the fair value of hedging instruments during the year. The amount of €74 million comprisesthe balance as of 31st December 2000 and changes in the fair value of securities of €(10) million, as disclosed in the ConsolidatedStatements of Changes in Shareholders’ Equity, too.

Notes to Consolidated Financial Statementscontinued

90 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 91

Summary of impacts on individual balance sheet captions on 1st January 2001Available-for- Currency Interest

in €m sale-Investments contracts contracts Total

Other current assets – 80 – 80

Provisions (Financial Liabilities) – (686) – (686)Subtotal – (606) – (606)Deferred income tax – 222 – 222Total net of deferred tax – (384) – (384)

23. SEGMENT REPORTINGThe Group operates in five divisions; a description of the products and services, from which each segment derives its revenues, follows:

• Airbus – Development, manufacturing, marketing and sale of commercial jet aircraft of more than 100 seats.• Military Transport – Development, manufacturing, marketing and sale of light and medium military transport aircraft and special

mission aircraft.• Aeronautics – Development, manufacturing, marketing and sale of civil and military helicopters, military combat and trainer

aircraft, regional turboprop aircraft and light commercial aircraft; and civil and military aircraft conversion and maintenance services. • Defence and Civil systems – Development, manufacturing, marketing and sale of missiles systems; and provision of defence

electronics, military and commercial telecommunications solutions; and logistics, training, testing, engineering and other related services.

• Space – Development, manufacturing, marketing and sale of satellites, orbital infrastructures and launchers; and provision oflaunch services.

Revenues are allocated to countries based on the location of the customer. Segment assets are allocated based on the location of the respective units. Capital expenditures represent mainly the purchase of property, plant and equipment and the increase in leased assets.

Information with respect to the Group’s industry segments follows:Defence

Military Aero- and Civil HQ/ Conso-in €m Airbus Transport nautics Systems Space Elimin. lidated

2001

Total revenues 20,549 547 5,065 3,345 2,439 (1,147) 30,798Share of net profit of associates (12) 0 0 (14) (63) 111 22EBIT pre goodwill amortisation and exceptionals 1,655 1 308 (79) (222) 31 1,694Identifiable segment assets (incl. goodwill) 27,264 568 7,187 5,583 3,462 4,651 48,715Investments in equity method associates 0 0 0 0 0 1,252 1,252Segment total liabilities 25,532 365 5,869 3,545 2,601 367 38,279Capital expenditures 1,433 63 281 159 99 161 2,196Depreciation,amortisation and related impairment losses 1,625 21 278 1,147 331 158 3,560Goodwill 7,089 0 1,005 1,464 736 148 10,442

2000 pro-forma

Total revenues 14,856 316 4,704 2,909 2,535 (1,112) 24,208Share of net profit of associates 6 (1) 2 77 (16) 43 111EBIT pre goodwill amortisation and exceptionals 1,412 (63) 296 (110) 67 (203) 1,399Identifiable segment assets (incl. goodwill) 21,352 435 6,548 5,857 3,233 4,019 41,444Investments in equity method associates 0 0 0 125 29 1,164 1,318Segment total liabilities 19,094 269 5,176 2,983 1,951 1,500 30,973Capital expenditures 657 55 307 117 145 70 1,351Depreciation,amortisation and related impairment losses 622 28 226 221 165 278 1,540Goodwill 3,310 0 1,056 2,675 915 93 8,049

Intercompany sales are principally realised on an arm’s length basis and are mainly between Aeronautics and Airbus.

Most assets of the Group are located in the European Union.

EADS uses EBIT pre-goodwill amortisation and exceptionals as a key indicator of its economic performance. The term “exceptionals”refers to income or expenses of a non-recurring nature, such as amortisation expenses of Fair Value Adjustments relating to the EADSMerger, the Airbus Combination and the formation of MBDA, as well as impairment charges. EBIT pre-goodwill and exceptionals istreated by management as a key indicator to measure the segments economic performances.

2001 2000in €m pro-forma

Income before financial income, income taxes and minority interests 2,514 200

Dilution gain Airbus UK, MBDA (2,794) –Goodwill amortisation and related impairment charges 1,466 429Exceptional depreciation (fixed assets) 260 176Exceptional depreciation (financial assets) 315 –Exceptional depreciation (inventories) 275 483Income from investments (342) 111

EBIT pre goodwill and exceptionals 1,694 1,399

Revenues (by destination) OtherEuropean North Latin Other Conso-

in €m France Germany Countries America America Asia Countries lidated

2001 3,521 3,588 6,728 10,394 1,749 3,138 1,680 30,7982000 pro-forma 3,408 3,461 5,934 6,724 924 2,221 1,536 24,208

24. STOCK-BASED COMPENSATION Stock Option PlanThe Board of Directors of EADS approved the establishment of a stock option plan for the 11 members of the Executive Committeeand senior managers of the Group. Stock options for the purchase of 8,524,250 EADS shares were granted on 12th July 2001 ofwhich 780,000 were granted to the members of the Executive Committee. Approximately 1,600 employees of the Group weregranted options, which are only exercisable after a vesting period. The vesting period amounts to two years and four weeks from the date of granting with respect to 50% of the options and three years for the remaining options. The options expire ten years aftertheir grant.

The exercise price is equal to €24.66 representing 110% of fair market value of the shares at the date of grant. The options may not beexercised during the period of three weeks before either the Annual General Meeting or the announcement of annual or semi-annualor quarterly results.

Notes to Consolidated Financial Statementscontinued

92 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Notes to Consolidated Financial Statements 93

The following table summarises the development of stock options:Number of Options

2001 2000

Balance at 1st January 5,375,400Additions 8,524,250 5,564,884Exercised –Forfeited (597,825) (189,484)

Balance at 31st December 13,301,825 5,375,400

No compensation expense was recognised in 2001 in connection with the Group’s stock option grants.

Employee Stock Ownership Plan (ESOP) 2001 In 2001, eligible employees were able to purchase a maximum of 500 shares per employee of previously unissued shares within the ESOP 2001. The offer was broken down into two tranches which were available for all employees to choose. The subscriptionprice for tranche A was €10.70, calculated as a discount of €1.00 from the lowest market price on the Paris stock exchange on 12th October 2001 (fixed at €11.70), the day the Board of Directors granted the right to purchase shares within the ESOP 2001. The subscription price for tranche B was the higher of the subscription price for tranche A or 80% of the average opening marketprice for EADS shares on the Paris stock exchange during the 20 stock market days preceding 12th October 2001, resulting in a subscription price of €10.70, too.

During a vesting period of at least one year under tranche A or five years under tranche B, employees are restricted from selling theshares, but have the right to receive all dividends paid as well as have the ability to vote at the annual shareholder meetings. EADSsold 2,017,894 ordinary shares with a nominal value of €1.00 under both tranches. No compensation expense was recognised inconnection with the ESOP 2001.

25. RELATED PARTY TRANSACTIONSRelated parties – The Group has entered into various transactions with related companies in 2001 and 2000 that have all beencarried out in the normal course of business at arm’s length. Transactions with related parties include the French State,DaimlerChrysler, Lagardère, and SEPI (Spanish State). Except for the transactions with the French State the transactions are notconsidered material to the Group either individually or in the aggregate. The transactions with the French State include mainly salesfrom the Aeronautics, Defence, and Space divisions.

Remuneration – The remuneration of Directors and pensions of/other contributions to retired Directors amount to €5.60 million.Additionally exist accruals for pension obligations of €1.87 million. The above remuneration does not include any amounts for thevalue of options to subscribe for the ordinary shares in EADS granted to or held by the Directors. Reference is made to Note 24 of thefinancial statements.

EADS has not provided any loans to/advances to/guarantees on behalf of (retired) Directors.

26. INVESTMENT PROPERTYThe Group owns investment property, mainly contributed by Dasa to EADS, that is leased to third parties. The investment propertycontributed by Dasa was recorded at fair value as of 1st July 2000. For the purposes of IAS 40 disclosure requirements, EADSdeveloped the fair values of investment property based on the values on the opening balance sheet of EADS.

The fair values have been determined using official guideline numbers for land and insured values as well as values reconciled fromrental income for buildings. The determination of fair values is mainly supported by market evidence and was performed with regardto the fair values as of 1st July 2000 by a registered independent valuer having an appropriate recognised professional qualificationand recent experience in the location and category of the property being valued. As there have only been very minor changes sincethat date, the Group has not used an independent certifier since then.

Buildings held as investment property are depreciated on a linear basis over their useful life which is mainly around 40 to 50 years.The values assigned to investment property are as follows:

Changes inconsolidation

Net at scope/ Net at31st December Depreciation/ exchange 31st December

in €m 2000 Additions Disposals amortisation differences 2001

Book value of Investment Property 87 11 0 1 0 97

The fair value of the Group’s investment property amounts to €98 million (2000: €87 million). Rental income is stated at €12 million(2000: €12 million), direct operating expenses arising from investment property that generated rental income comes to €7 million(2000: €7 million).

27. EARNINGS PER SHAREBasic earnings per share – Basic earnings per share is calculated by dividing net income attributable to shareholders by the weightedaverage number of issued ordinary shares during the year.

2001 2000pro-forma

Net income attributable to shareholders €1,372m €(909)mBalance of issued ordinary shares at beginning of year 807,157,667 807,157,6675th December 2001 – Issue of new shares for cash (ESOP 2001) 2,017,894Balance of issued shares at end of year 809,175,561 807,157,667Weighted average number of ordinary shares in issue 807,295,879 807,157,667Basic earnings per share €1.70 €(1.13)

For comparative reasons, the Group presents pro-forma earnings per share for 2000. Due to the foundation of the Group in July 2000,accompanied by a significant increase in the number of shares as a result of the initial public offering on 10th July 2000, and theconcurrent acquisition by ASM of Dasa and Casa, whose revenues and expenses were not included in the EADS profit and lossstatement for the period 1st January to 30th June 2000, the pro-forma number of shares for 2000 is based on the number of issuedshares and stock options granted as at 31st December 2000.

Diluted earnings per share – For the calculation of the diluted earnings per share, the weighted average number of ordinary sharesis adjusted to assume conversion of all potential ordinary shares. The Group’s only category of dilutive potential ordinary shares isstock options. Since the exercise price of the stock options under both stock option plans initiated by the Group in 2001 and 2000 is exceeding the share price of EADS shares, to include these potential ordinary shares would be anti-dilutive. As a consequence, netincome as well as the weighted number of ordinary shares in issue is the same for both basic and diluted earnings per share.

2001 2000pro-forma

Net income attributable to shareholders €1,372m €(909)mWeighted average number of ordinary shares in issue 807,295,879 807,157,667Diluted earnings per share €1.70 €(1.13)

28. NUMBER OF EMPLOYEES The number of employees at 31st December 2001 is 102,967 as compared to 88,879 at 31st December 2000.

Notes to Consolidated Financial Statementscontinued

94 EADS 2001 Notes to Consolidated Financial Statements

EADS 2001 Appendix: Information on principal investments 95

2000 2001 Company Head officeAirbus

F F Airbus SAS Toulouse (France)F F Airbus France SAS Toulouse (France)

F Airbus Holding SA FranceF F EADS CASA S.A. (Unit: EADS CASA Airbus) Madrid (Spain)F F SATIC G.I.E. Colomiers (France)F F Airbus Finance Company Holdings BV Amsterdam (Netherlands)F F Airbus Finance Company Ltd Dublin (Ireland)F F EADS Airbus Deutschland GmbH Hamburg (Germany)F F KID-Systeme GmbH Buxtehude (Germany)F F Aircabin GmbH Laupheim (Germany)F F DEX Beteiligungs- und Verwaltungs GmbH Ottobrunn (Germany)F F ZDW Beteiligungs- und Verwaltungs GmbH Munich (Germany)F F EADS Airbus Beteiligungs GmbH Ottobrunn (Germany)P F Airbus Industrie G.I.E. Blagnac (France)P F AVSA SARL Blagnac (France)P F AI Participations S.A.R.L. Blagnac (France)P F Société Commerciale A-300 S.A.SOCA Blagnac (France)P F Airbus Simulators Services S.N.C. (ASS) Blagnac (France)P F Airbus Transport International S.N.C. (ATI) Blagnac (France)P F Airbus Military Company SAS. Toulouse (France)P P Groupemente Immobilier Aéronautique S.A. (GIA) FranceP F Airbus Mauritius limited MauritiusE E Alexandra Bail G.I.E FranceP F Airbus China limited Hong-KongP F Aircelle SAS FranceP F Airbus Ré S.A. LuxembourgP F AVSA Canada Inc CanadaP F Airbus North American Holdings Inc. (AINA) USAP F Airbus Service Company Inc. (ASCO) USAP F AI leasing Inc. USAP F Norbus USAP F AINA Inc. USAP F 128829 Canada Inc. CanadaP F Airbus Industrie Financial Service Holdings B.V. (AIFS) NetherlandsP F Airbus Industrie Financial Service Holdings ltd.( AIFS) IrelandP F Airbus Industrie Financial Service ltd. (AIFS) IrelandP F AIFS (Cayman) ltd. Cayman IsleP F AIFS Cayman Liquidity ltd. Cayman IsleP F A 320 Financing limited IrelandP F AIFI LLC Isle Of Man

Frusco limited IrelandShadyac Limited Ireland

F Airbus UK Limited UKF Airbus Invest Toulouse (France)F EADS Aéro Toulouse (France)F EADS Star Real Estate SAS Boulogne (France)E Tenzing communication inc USA

Additionally are consolidated 29 SPCs.

Defence & Civil Systems– – EADS Deutschland GmbH Verkehrsleittechnik TB67 Unterschleißheim (Germany)F F FmElo Elektronik- und Luftfahrtgeräte GmbH Ulm (Germany)F F Hagenuk Marinekommunikation GmbH Flintbek (Germany)F F EUROBRIDGE Mobile Brücken GmbH Friedrichshafen (Germany)F F EADS Deutschland GmbH – Verteidigung und Zivile Systeme Ulm (Germany)F F Dornier GmbH – Verteidigung und Zivile Systeme Friedrichshafen (Germany)F F EADS Funkkommunikation GmbH Ulm (Germany)F F Ewation GmbH Ulm (Germany)F F Matra Aerospace Inc. (M.A.I.) Frederick Maryland (USA)F F Fairchild Controls Corporation Frederick Maryland (USA)F Germantown Holding Company Frederick Maryland (USA)F F Manhattan Beach Holdings Co. Frederick Maryland (USA)F F Matra Systemes & Information Velizy (France)F F APIC Arcueil (France)F G 2 I Velizy (France)F F EADS Services Boulogne (France)

F Pentastar Holding Paris (France)F Aviation Defense Service S.A. Saint-Gilles (France)

F F M.C.N. SAT HOLDING Velizy (France)F F MULTICOMS (MNC Sat Services) Sèvres (France)

F: Fully consolidated P: Proportionate E: Equity method

Appendix: Information on principal investments

2000 2001 Company Head officeDefence & Civil Systems continued

F Matra Global Netservices (Grolier Network) Boulogne (France)F F International Test & Service Velizy (France)

F TYX Corp. Reston, VA, USAF ARC CA, USAF ARC-IAI San Antonio, TX, USA

F F M.P. 13 Paris (France)F F EADS Matra Datavision S.A. Paris (France)F F EADS Matra Datavision International Les Ulis (France)F F EADS Matra Datavision Ltd CovAddition (UK)F F EADS Matra Datavision AG Regensdorf (Suisse)F F EADS Matra Datavision Benelux Brussels (Belgium)F F EADS Matra Datavision Asia Pacific Wanchai (Hong Kong)F F EADS Matra Datavision B.V. Leiden (Netherlands)F F EADS Matra Datavision GmbH Munich (Germany)F F EADS Matra Datavision Iberia Madrid (Spain)F F EADS Matra Datavision Inc. Andover (USA)F F EADS Matra Datavision Kk Tokyo (Japan)F F EADS Matra Datavision SpA Turin (Italy)F F Open Cas Cade Paris (France)

F ETP SPA Turin (Italy)F F Matra Defense Velizy (France)F F Matra Holding GmbH Frankfurt (Germany)P P MBDA SAS Velizy (France)P P MBDA Management S.A. Velizy (France)P P ALKAN Valenton (France)P P MBDA France Velizy (France)P P MBDA UK Ltd. Stevenage, Herts (UK)P P Matra Electronique La Croix Saint-Ouen (France)F P MBDA Missiles S.A. Chatillon sur Bagneux (France)P P MBDA Inc Westlack, CA (USA)

P MBDA Italy SpA Roma (Italy)P MBDA Treasury Jersey (UK)P Marconi Overside Ltd. Chelmsford (UK)P AMS Dynamics Ltd. Guernsey (UK)

P P Celerg Le Plessis-Robinson (France)F F Celerg international Le Plessis-Robinson (France)F F International de systemes propulsifs Paris (France)F F LFK – Lenkflugkörpersysteme GmbH Unterschleißheim (Germany)F F TDW – Ges. für verteidigungstechnische Wirksysteme GmbH Schrobenhausen (Germany)F F TAURUS Systems GmbH Schrobenhausen (Germany)P P Bayern-Chemie Gesellschaft für flugchemische Antriebe mbH Aschau/InnP P Propulsion Tactique S.A. La Ferte Saint Aubin (France)P P TDA – Armements SAS. La Ferte Saint Aubin (France)P P Forges de Zeebrugge S.A. Herstal-Liege (Belgium)F F EADS Defence & Security Networks Bois d’Arcy (France)F F Matra Radio Systems Madrid (Spain)F F AEG Mobile Communication Ulm (Germany)F F Matra Communications Mexico Mexico DF (Mexico)F F EGT Bruxelles (Belgium)F F MC Denmark Copenhague (Denmark)F F MC Italy Milan (Italy)F F Matra Comunicaciones de Espana Barcelona (Spain)E Nortel Networks Germany GmbH & Co KG Friedrichshafen (Germany)F F Matra Nortel Holding (MNH) Paris (France)F F MATRAnet Velizy (France)F MATRAnet Inc. Redwood shores, CA (USA)F F Matra Communication USA Inc Dallas, Texas (USA)F F Intecom Inc Dallas, Texas (USA)F F Intecom Holding ULC Dallas, Texas (USA)F F Intecom Canada Inc Dallas, Texas (USA)F F Pyderion Contact Technologies Inc. Dallas, Texas (USA)

F Cogent UKE Matra Nortel Communications Quimper (France)

SpaceAerospatiale Matra Lanceurs Stratégieuses et Spaciaux Paris (France)

F F Amanthea Holding B.V. Amsterdam (Netherlands)P P Astrium GmbH München (Germany)P P Astrium Ltd. Stevenage (UK)P P Astrium N.V. The Hague (Netherlands)

F: Fully consolidated P: Proportionate E: Equity method

96 EADS 2001 Appendix: Information on principal investments

Appendix:Information on principal investmentscontinued

EADS 2001 Appendix: Information on principal investments 97

2000 2001 Company Head officeSpace continued

P P Astrium SAS Toulouse (France)P Computadoras, Redes e Ingenieria SA (CRISA) Madrid (Spain)

F F EADS CASA S.A. (Unit: EADS CASA Space) Madrid (Spain)F F EADS Deutschland GmbH – Space Services Munich (Germany)F F EADS Dornier Raumfahrt Holding GmbH Munich (Germany)F F EADS Launch Vehicles Vèlizy (France)F F Global DASA LLC New York (USA)E E Loral Dasa Globalstar L.P. New York (USA)P P Matra Marconi Space UK Ltd. Stevenage (UK)

Matra Space Systems Participations BV The Hague (Netherlands)P P MMS Space Holdings N.V. Amsterdam (Netherlands)P P MMS Systems Ltd Stevenage (UK)E E Nahuelsat S.A. Buenos Aires (Argentina)F P NRSCL Infoterra Ltd Southwood (UK)

Sodern Limeil-Brevannes (France)Spot Image Toulouse (France)

P TESAT-Spacecom GmbH & Co. KG Backnang (Germany)Military Transport Aircraft

F F EADS CASA S.A. (Unit: EADS CASA Military Transport Aircraft) Madrid (Spain)Aeronautics

F F Elbe Flugzeugwerke GmbH Dresden (Germany)F EADS EFW Beteiligungs- und Verwaltungsgesellschaft GmbH Munich (Germany)

F F EADS Sogerma S.A. Mérignac (France)F F EADS Seca S.A. Le Bourget (France)F F Barfield B.C. Miami, Florida (USA)F F EADS Revima S.A. Tremblay en France (France)F F Composites Aquitaine S.A. Salaunes (France)F F Maroc Aviation S.A Casablanca (Morocco)F F Noise Reduction Engineering B.C. Washington D.C. (USA)F F Aerobail GIE Paris (France)F F EADS Aeroframe services LLC Lake Charles, Louisiana (USA)

F EADS Sogerma Tunisie Monastir (Tunisia)F F Eurocopter Holding S.A. Paris (France)F F Eurocopter S.A. Marignane (France)F F Eurocopter Deutschland GmbH Munich (Germany)F F American Eurocopter Corp. Dallas, Texas (USA)F F Eurocopter Canada Ltd. Ontario (Canada)F F Eurocopter South East Asia SingaporeF F Helibras – Helicopteros do Brasil S.A. Itajuba (Brazil)F F EADS Socata S.A. Le Bourget (France)F F EADS Deutschland GmbH – Military Aircraft Munich (Germany)F F Dornier Flugzeugwerft GmbH Manching (Germany)F F EADS CASA S.A. (Unit: EADS CASA Military Transport Aircraft) Madrid (Spain)F F EADS ATR S.A. Toulouse (France)P P ATR GIE Toulouse (France)E Fairchild Dornier Luftfahrt Beteiligungs GmbH Oberpfaffenhofen (Germany)

HeadquartersF F EADS France Paris (France)F F EADS Deutschland GmbH – Zentrale Munich (Germany)F F EADS Deutschland GmbH, LO – Liegenschaften OTN Munich (Germany)F F EADS Deutschland GmbH, FO – Forschung Munich (Germany)F F EADS Raumfahrt Beteiligungs GmbH Ottobrunn (Germany)F F DADC Luft- und Raumfahrt Beteiligungs AG Munich (Germany)F F Dornier GmbH – Zentrale Friedrichshafen (Germany)F F EADS CASA S.A. (Headquarters) Madrid (Spain)E E Dassault Aviation Paris (France)E E Dassault International France Vaucresson (France)E E Dassault Falcon Jet and subsidiaries Teterboro NJ (USA)E E Sogitec Industries Suresnes (France)E E Dassault Falcon ServiceE E IPSE E Dassault Aero ServiceE E Dassault Assurances CourtageE E Dassault lnternational lnc Paramus NJ (USA)E E Société Toulouse Colomiers

F Airbus Finance Company Holding B.V. Dublin (Ireland)F S.C.I. Matra Toulouse Toulouse (France)

F: Fully consolidated P: Proportionate E: Equity method

HEADQUARTERS

European Aeronautic Defence &

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Le CarréBeechavenue 130 – 1321119 PR Schiphol-RijkThe NetherlandsTel +31 20 655 4800

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98 EADS 2001 Addresses

EADS Addresses

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EADS 2001 Addresses 99

Financial calendar 2002Global Investor Forum:

7 – 8th February 2002 Marignane, France

Annual Results Presentation:

18th March 2002

Annual General Meeting:

17th May 2002 Amsterdam, The Netherlands

Interim Report Q1 – 3 months results:

17th May 2002

Interim Report Q2 – Half Year results:

25th July 2002

Interim Report Q3 – 9 months results:

14th November 2002

www.eads.net100 EADS 2001 Shareholder Information

Shareholder Information

newsletter “aero-notes”

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Annual General Meeting in Amsterdam,10th May 2001

Key information for ShareholdersAn investor relations team is dedicated to provide periodic information to shareholderswhether they are individual shareholders, employees or institutions.

In 2002, EADS will continue to enhance shareholders communication with thepublication of quarterly full results.

The Investor Relations team also offers a variety of information sourcesupdating the shareholders on EADS progress such as the quarterly newsletter called“Aeronotes” and a monthly investor communiqué available on EADS website starting inApril 2002.

The EADS Web site, www.eads.net, also provides a wide range of information includingfinancial topics. Shareholders can contact us everyday on our special toll-free lines.

Investor Relations contact:Toll Free Telephone Numbers:France 0 800 01 2001Germany 00 800 00 02 2002Spain 00 800 00 02 2002

Shareholders from other countries can contact us at +33 1 41 33 90 94An e-mail box is dedicated to answering shareholders inquiries:comfi@eads.net

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